 The forex markets are treading water ahead of today’s FOMC decision. While the announcement typically acts as a volatility trigger, the lack of suspense surrounding this meeting could mean muted price action even after Chair Jerome Powell’s press conference. Markets are pricing in a near-certainty, 99% probability, that Fed will hold the policy rate steady at 4.25–4.50% for a fourth straight meeting, leaving little room for surprise. Adding to the quiet is the absence of updated economic projections and dot plot guidance, which are only due at the June meeting. Last week's stronger-than-expected non-farm payrolls cooled expectations for near-term easing, with the chance of a June rate cut falling to around 30%. Traders will be closely watching Powell’s tone for any nuanced shift, particularly regarding the timing of the next rate cut. However, officials are likely to maintain their cautious, data-dependent posture given persistent economic uncertainty, especially around the evolving US tariff policies. Indeed, Powell is expected to reiterate that the Fed is not in a hurry to adjust rates. The ongoing tariff truce and upcoming negotiations—such as this weekend’s Geneva meeting between U.S. and Chinese trade officials—introduce substantial geopolitical risks that could influence inflation, growth, and financial conditions. With so many moving parts, Fed is unlikely to make any forward commitments. For now, the market still leans toward three rate cuts by year-end, which would bring the target range down to 3.50–3.75%, but policymakers are not ready to validate that path..... |
