Fresh on the heels of today’s surprisingly low inflation data for the United States, all eyes will be on the big Fed decision ahead. Tomorrow afternoon at 2 pm ET, the Federal Open Market Committee (FOMC; the policy-making body within the Federal Reserve) will reveal their latest increase in the Federal Funds Rate, along with a corresponding statement and a new set of economic projections for the next two years (including interest rate forecasts). Following this, at 2:30 pm ET Fed Chair Jerome Powell will speak at the FOMC press conference, where he will answer questions regarding monetary policy strategy, economic outlook, and more. All these events are likely to cause a great deal of volatility across financial markets, especially as equities investors eagerly await a slower rate hike pace.
With a 50 basis point rate hike forecast for tomorrow, instead of another brutal 75 basis point hike like those that have been implemented consecutively the past several times, traders and analysts will be on the lookout for more signals regarding a further pivot away from hawkishness. They may feel further emboldened in this search in light of the latest CPI data released this morning, showcasing another month of slowing inflation, bolstering stock market optimism and reducing US Dollar bullishness. However, whether evidence for this narrative continues to build has yet to be seen: there is still the chance that the FOMC could further upwardly revise interest rate forecasts while slowing the pace, which would not be quite as bullish for stocks and bearish for USD as it may seem.
Three Indices to Watch
In yesterday’s article we discussed three pairs to monitor for those who are bullish on USD; they remain worth checking on for potential trade setups this week. Today, however, let’s examine three stock market indices worth watching for those who may be anticipating a fundamental catalyst related to potential Fed dovishness tomorrow. Though two receive neutral signals, the EdgeFinder currently offers positive ratings for all three listed below, as can be seen among their respective ratings, signals/biases, and corresponding charts.
1) US30 (Dow Jones) - Earns a ‘3’ Rating, or a ‘Buy’ Signal
2) SPX500 (S&P 500) - Earns a ‘2’ Rating, or a ‘Neutral’ Signal
3) NAS100 (Nasdaq-100) - Earns a ‘2’ Rating, or a ‘Neutral’ Signal
The dollar flew higher last week as a result of resilient economic news along with a higher PCE than expected. Now the DXY has reached a decision point in price action. This week's NFP will help determine the sentiment around the potential June rate hike. Here is what we are looking at: EdgeFinder Analysis USDCAD […]
Considerably dovish news from central banks in the US and New Zealand has caused a major stir in the markets. Governor Orr and Vice Chairman Powell both released some reassuring news for the economy in the long term. But what does this mean for USD and NZD? EdgeFinder Analysis GBPNZD is a pair that should […]
As we trade into a broad news week covering the economic status of multiple countries, there are several scenarios we should consider. Although it is impossible to predict the future, we can at least prepare for the news events set to come this week for kiwi, dollar and the pound. EdgeFinder Analysis GBPJPY still maintains […]
