FOMC meeting implications
Tomorrow’s FOMC meeting will likely leave interest rates unchanged, yet uncertainty about future meetings may move markets including US dollar pairs. After tomorrow, there are only two more FOMC meetings in 2023 and Fed Chair Powell is expected to clarify what could happen at those meetings. Markets are currently predicting a 40% chance of an additional rate hike this year – this percentage could move towards extremes depending on how explicit Powell is on future hikes.
US dollar could be directly impacted by a shift in expectations. Last week, EUR/USD fell after the European Central Bank meeting despite a 25 bps increase in rates. The conclusion from the ECB was that this hike would likely be the last in 2023. A similar message from the Fed could weaken USD, while indication of another rate hike could send the dollar higher.
