Fed on Deck

Global markets are bracing for the latest Fed monetary policy meeting today. While the FOMC is not expected to see the Fed altering its course, traders will be scouring the details of the meeting, as well as the post meeting press-conference, for clues as to how the Fe dis likely to act in coming months and over the remainder of the year. Markets have struggled to get a firm read on when the Fed is likely to begin cutting rates, with market pricing jumping around regularly in response to data and Fed commentary.

Dot-Plots in Focus

Looking at today’s event, the main focus will likely be on the updated dot-plot forecasts. These projections, which show each policymakers rates forecast for the year ahead hold the potential to create plenty of volatility today if we see any shift. Last updated in December, the dot-plots forecast three rate cuts this year totalling .75% worth of easing. If this shifts lower to just two rate cuts, this would be firmly bullish for USD near-term, weighing on risk markets across the board. On the other hand, If the Fed sticks to its current projections, signalling three rate cuts to come this year, that should take the wind out of the current USD rally.

Timing Signals

Along with these projections, traders will also be looking for some signal around timing with any nod to a summer cut also likely to lean on USD near-term. Traders are currently pricing in a cut by the June meeting. If this pricing increases, It should weaken USD near-term. However, If the Fed continues to urge caution and patience, this again would likely be USD bullish near-term, diluting those June rate-cut pricings.

Technical View

DXY

The rally off the 102.49 level has seen the market breaking back above 103.48. Price is now testing the bear channel highs with a break here putting focus on the key level of 104.95, the current YTD highs. Any break above that level will be firmly bullish, causing a strong reaction across markets.