Markets await the Fed’s decision on interest rates

USD

This morning GBP/USD is trading close to two-year lows and USD/EUR is approaching five-year highs.

Later today the Federal Reserve will release their latest monetary policy statement, interest rate decision and provide forward guidance. They are expected to raise rates by 50 basis points, which has been projected in the markets. There is also an expectation for the Fed to announce a plan to start quantitative tightening.

While the rate rise is already widely expected, the comments thereafter will be watched closely. Any signals from Jerome Powell, suggesting the bank could move for further hikes will ultimately lead to further dollar strength. On the other hand, if Powell suggests that the Fed will hold off post May meeting, we could see some weakness for the dollar. However, the latter is less likely to happen.

Key announcements

10:00 – EUR – Retail Sales YoY (previous 5, consensus 1.4)
13:15 – USD – ADP Employment Change (previous 455k, consensus 395k)
15:00 – USD – ISM services (April) (previous 58.3, consensus 58.5)
19:00 – USD – Fed interest rate decision