Forex Today: Markets Await Fed Statement

The US Federal Reserve’s policy meeting later today will be closely watched by markets for clues about the timing of forthcoming rate cuts, widely expected to begin in May 2024.

1. The US Federal Reserve will be holding a policy meeting today at which it is universally expected to maintain its interest rate of 5.50%. This will be the third successive meeting of no rate hike, which would seem to signal that the tightening cycle has truly ended. However, its statement and economic projections will be scrutinised for clues as to the timing of forthcoming rate cuts, with the market consensus currently expecting the Fed will start with a 0.25% cut in May 2024.
2. Yesterday saw the release of US inflation data which showed a fall in the annualized rate from 3.2% to 3.1%. The data was almost precisely in line with the consensus forecast, so there were no surprises, but the data seems to have acted as a catalyst for the US stock market to move higher. Yesterday saw both the NASDAQ 100 Index and the benchmark S&P 500 Index close at near 2-year high price, making both indices very attractive to trend traders on the long side.
3. Crude Oil has fallen strongly over the past day to trade at new 6-month low prices, which might be interesting to trend traders on the short side. Industry analysts put the fall as partially down to an increasing perception of a small glut caused by strong US and Russian supply outstripping demand.
4. In the Forex market, since the Tokyo open, the New Zealand Dollar has been the weakest major currency, while the US Dollar has been the strongest, putting the NZD/USD currency pair in focus. There do not seem to be any valid long-term trends to exploit in this asset class right now, with the US Dollar’s direction looking uncertain although there may be more direction after the FOMC release later today.
5. Bitcoin is continuing to fall from its recent 18-month high above $44,000. It remains to be seen whether it stabilizes at nearby support levels, where trend traders may still find new long trade entries.
6. Cocoa futures ended last week Friday at a multi-year high weekly closing price.
7. There will be releases today of UK GDP data and US PPI data.