The dollar fell before the Fed's decision, so what are the market's expectations ?
The US dollar index fell slightly on Wednesday, continuing to record losses for the fourth consecutive session, as investors awaited the Federal Reserve's decision on monetary policy, amid growing concerns about the future of the US economy, and the escalation of divestments from US assets, especially by major investors in Asia.
Calm trade fears, will they continue ?
The news of the talks between the United States and China at the beginning of the week contributed to easing fears of a trade war, which positively affected investor sentiment after a period of hesitation about the dollar and the US markets, and despite some limited recovery of the dollar as trade negotiations approach, the pessimistic outlook towards the US economy remains dominant, putting the greenback under constant pressure.
Fed decision forecast: between tightening and easing
Most analysts expect the Fed to keep interest rates unchanged at today's meeting, with signals from its Chairman Jerome Powell that more data should be awaited before determining the next step, while traders are betting on the start of a cycle of interest rate cuts next July, some economists doubt that this will happen this year due to high inflation fears.
Thus, if it were not for market expectations, we would have expected that this decision would not be a significant event, and that the decision would pass without significant movements, but in fact there is room for disappointment.
The market estimates about 80 basis points of monetary easing by the end of the year, and Fed Chairman Powell is likely to oppose these dovish forecasts and be somewhat hawkish due to rising inflation, which leads to a re-pricing of monetary policy and therefore we may see a rise in the US dollar at the time of the decision.
And vice versa, if Jerome Powell agrees to this pricing by 80 points and around or hinted at it at the time of his speech, and therefore we may see further declines for the dollar at the time of the decision.
