The FOMC will announce its decision today at 7pm GMT and president Powell will take the stage 30 minutes later. January is a so-called “off” meeting with no dot-chart and forecasts – tools that are very helpful for gauging future rate expectations. What to watch for today?
The decision – this is the easy part – the Fed will do nothing – right now there are moderate (around 30%) expectations for a cut by June. Adjusting the IOER rate slightly up seems to be a long shot but it’s a possibility. This is not the policy rate and the Fed likes to stress it but nevertheless a move higher (probably 5 bps if the Fed decides to touch it) could have a market impact.
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Open account Try demo Download mobile app Download mobile appThe statement – how does the Fed see balance of risks? There has been some upbeat data lately and trade tensions abated – at least for now. The Fed is likely to use it as a counterbalance for…
Virus risks – we highly doubt that the Fed will want to address those. Powell will be questioned but he will only mention uncertainties and assure their vigilance. Which makes the most interesting part being:
Repo operations – the Fed insists this is just a liquidity tool but accusations of pumping up a stock market bubble mount. This means the Fed might have an eye on the exit strategy, although might want to do at least some operations through April when tax payments hurt the system reserves. Any hint at the exit would be probably the biggest thing with an impact on both the US dollar (positive) and stocks (negative).
Will 1.10 hold? EURUSD has been under a severe pressure lately despite upbeat PMI data. Source: xStation5
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