Will the Fed make or break Dollar’s rally today? This question is the focus for investors. Moreover, will US policymakers raise rates again? Find the answers as analysts at ADS Securities shared their FOMC Rate Decision Meeting 2 May US Dollar Impact Analysis.
2 May, ADS Securities – All eyes will be on the Fed tonight as the US central bank prepares to deliver their interest rate decision and monetary policy guidance. On the rate decision front, we clearly expect no changes in policy this month but it’s the forward guidance that will make headlines and subsequently make or break the US Dollar’s rally.
FOMC Rate Decision Meeting: 2 May US Dollar Impact Analysis
The greenback is gaining across the board for the past 48 hours as investors share our view that the tone coming from Jerome Powell and Co. today will be a positive one. Recent US economic performance has been steadily positive with good progress along most key sectors and metrics giving the Fed all the excuses they need to remain on a tightening path.
We believe that the US policymakers are on track to raise rates again next month and today’s meeting is the perfect opportunity to prepare market participants for this and limit volatility when they actually pull the trigger in June. Fed Funds futures this morning indicate a 92.7% chance of a rate hike next month highlighting the consensus in the market which is the primary catalyst underpinning Dollar’s fresh surge higher.
The greenback is pushing the Euro and the Pound below the 1.20 and 1.36 levels respectively and a strong message coming from the Fed will send these currencies towards the 1.19 and 1.35 floors. At the same time, Dollar/Yen broke above 109.50 yesterday as we expected and it’s now traveling towards the 110.50 area which should be quickly reached depending on how bullish the Fed tone will be.
Pound Trading Outlook
On a side note, the Pound is also making headlines with the release of the Manufacturing PMI yesterday indicating further weakness which dragged the UK currency below 1.37. Today we have the release of the Construction PMI figures and with investors focused on the Fed these will go unnoticed but the same cannot be said for tomorrow’s Services sector’s data.
Expectations are set for a positive printing that will be a lifeline for the weakening Sterling but if the data misses there as well the Pound will sink fast with the 1.33 area coming into focus.
Asian Equities Markets
Equities in Asia are having a mixed day following a mostly positive US session that saw the S&P 500 gaining 0.25% and the NASDAQ closing almost 1% higher. Most European markets were closed yesterday and this morning the European futures indicate a positive opening bell even though US Treasury yields continue to rise again towards the 3% mark.
Investors prefer to focus on the positive geopolitical improvements right now but we believe that a bullish Fed today and an extending US bond yields’ rally will soon put stocks under pressure.
Market Events To Watch
- UK Construction PMI – 12.30pm
- Euro-Zone Gross Domestic Product – 1 pm
- FOMC Rate Decision – 10 pm
All times are GMT +4.
ADS Securities Risk Disclaimer
This article was provided by analysts of ADS Securities.
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