- The Federal Reserve is expected to leave the policy rate that does not change for the third consecutive meeting.
- Fed Chairman Powell will speak the policy view at a press conference.
- The US dollar can remain elastic against its rivals if the Fed keeps its focus on inflation.
The United States (US) Federal Reserve (FED) will announce financial policy decisions following the May policy meeting Wednesday. Participants in the market widely expected the US Central Bank will leave policy settings that will not change for the third consecutive meeting, after cutting the interest rate by 25 points (BPS) points to 4.25% -4.5% range in December.
The CME Fedwatch's tool shows that investors hardly see a chance of cutting the rate in May, while pricing the nearly 30% possibility of a 25 bps deduction in June. Therefore, market participants will review the policy statement changes and comments from Fed Chairman Jerome Powell at the post-meeting press conference for fresh clues to the timing of the next cut rate.
Before the Fed went during the Blackout, many policy manufacturers expressed their concerns over the uncertainty created by the new US trade regime weighing the labor market.
Minneapolis Fed President Neel Kashkari said some businesses indicate that they are preparing for possible work cutting if uncertainty continues. Similarly, Governor Christopher Waller told Bloomberg that he was not surprised to see more disappearances and increased unemployment, increasing that increasing unemployment could provide the way for rates. As the Bureau of Labor Statistics reports that nonfarm payrolls rose 177,000 in April, which exceeded the market of 130,000, and the unemployment rate remained unchanged at 4.2%, investors were reluctant to price at a rate cut in June.
The May Fed meeting of the Fed meeting, the Danske Bank analysts said, “We hope the Fed maintains the financial policy that does not change at the May meeting, in accordance with the adventure and pricing of the market.”
“While we expect Fed to continue cutting rates in June, we doubt that Powell will choose clear guidance in the midst of tariff uncertainty. Growth risks will remain tilt down the downside, but increasing inflation expectations are still concerned,” Analysts added.
When does Fed announce its interest rate decision and how can it affect EUR/USD?
The US Federal Reserve is set to announce the decision of the interest rate and publish the financial policy statement Wednesday at 18:00 GMT. This will be followed by a press conference of Fed Chairman Jerome Powell starting at 18:30 GMT.
Investors will pay attention to how Fed and Chairman Powell can review the latest economic developments. Although the April working report showed that the working market conditions remained relatively healthy, the Bureau of Economic Analysis reported in Flash estimated that the US 'Gross Domestic Product (GDP) contracted at the annual rate of 0.3% in the first quarter.
In the event that the Fed recognizes a higher risk of a backwardness and the potential negative impact on rent, investors will see as a intense language. In this situation, the US dollar (USD) may undergo a modified sale pressure. On the other hand, investors can refrain from pricing at a rate cut in June and help the USD release its rivals, if the Fed reduces growth concerns and indicates that it will remain a patient about policy adjustments while waiting to see how tariffs affect.
Eren Sengezer, European Session Lead Analyst at FXStreet, provides a short -term technical outlook for EUR/USD:
“The close technical perspective points to the loss of bullish momentum, with an indicator of the relative index (RSI) in the daily chart that retreats to 50. Moreover, EUR/USD trading is close to 20-day simple moving average (SMA) after handling comfortably above this level throughout April.”
“In the fall, the Fibonacci 23.6% of the Uptrend retrating level that began in January forms a basic support of 1.1200. In the event of EUR/USD (Fibonacci 50% retracement).
Fed faqs
The US financial policy is shaped by the Federal Reserve (FED). The Fed has two mandates: to achieve price stability and promote full work. Its main tool to achieve these goals is by organizing interest rates. When prices rise rapidly and inflation is above the Fed's 2% target, it increases interest rates, increasing borrowing costs throughout the economy. This results in a stronger US dollar (USD) because it makes the US more attractive for international investors to park their money. When inflation falls below 2% or the unemployment rate is too high, the Fed may lower interest rates to encourage borrowing, with a greenback weight.
The Federal Reserve (FED) holds eight policy meetings a year, in which the Federal Open Market Committee (FOMC) assesses economic conditions and makes financial policy decisions. The FOMC was attended by twelve Fed officials-the seven members of the Board of Managers, the President of the Federal Reserve Bank of New York, and four of the remaining eleven regional reserve bank presidents, which served a one-year term on a spinning basis.
In extreme situations, the Federal Reserve can make a policy named EASING (QE). QE is the process by which the Fed greatly increases the flow of credit to a stuck financial system. This is a policy proposal that is not standard used during crises or when inflation is very low. This was the weapon of fed selection during the great financial crisis in 2008. It involves printing the Fed more dollars and using them to buy high -grade high -grade bonds from financial institutions. QE usually weakens the US dollar.
The quantity of tightening (QT) is the Reverse process of QE, where the Federal Reserve stops buying bonds from financial institutions and does not re -consist of the bonds from its bonds, to buy new bonds. This is usually positive for the US dollar value.
(This story was corrected on May 7 at 11:13 GMT to tell, in the first bullet and the first paragraph, whose Fed is expected to hold interest rates that are stable for a third consecutive meeting, not a fourth.)
