Powell Fomc Decision Tests Dollar at 19 BST, 20 CET
fomc moves into focus today at 19 BST/20 CET, when the Federal Reserve is due to announce its rate decision and Jerome Powell is expected to deliver what is described as his final press conference. A hawkish tone could give the dollar fresh support and keep pressure on US equities already facing a crowded earnings calendar.
Powell Faces 4% Inflation Pressure
4% is the level higher fuel and airline prices are pushing CPI back toward, and that is the backdrop for the Fed’s call. The central bank has so far treated those price gains as a transitory supply shock rather than the start of a demand-driven inflation spiral, but the language at 19 BST will show whether Powell is still leaning that way.
There is a good chance the Fed will signal it is still too early to conclude the inflation-growth trade-off and the monetary-policy implications that follow. For traders, that leaves the dollar vulnerable to a hawkish surprise and keeps EUR/USD in focus below 1.170, where buyers have continued to step in.
EUR/USD Holds Below 1.170
1.170 remains the key line for FX sentiment, with markets inclined to buy the dips in the pair below that level. A firmer dollar after Powell speaks would likely make that floor harder to break, while a softer message could leave the pair exposed to another test of support.
Yesterday the dollar recovered some ground over the past 24 hours as US equity jitters and concern about a lack of progress on a US-Iran deal supported it. That backdrop leaves little room for Powell to sound complacent, because any hint that the Fed is moving too slowly on inflation can extend the recent dollar bid.
Alphabet, Microsoft, Amazon, Meta
Alphabet, Microsoft, Amazon and Meta are all due to report today, giving US equities a second test alongside the Fed decision. If Powell errs on the hawkish side, the combination of policy caution and heavyweight earnings could widen the move in equities rather than offset it.
Tomorrow’s ECB meeting adds another layer, with Spain expected to see headline inflation rise to 3.5% and core inflation stay at 2.9%, while Germany’s headline rate should top 2.9%. Today’s Fed call will set the tone first, and Powell’s final press conference could decide whether the dollar keeps yesterday’s advance or hands it back before the European data and central-bank meeting land.
