FOMC Decision Eyed as Trump Talks Down the Dollar

US equity markets are poised to open a little higher on Wednesday as we await a selection of economic data and the first FOMC monetary policy decision since Donald Trump’s inauguration.

Trump and his aides have made efforts in recent days to talk down the greenback which has to an extent been successful, with the dollar index having slipped back below 100 to its lowest level since the December meeting. This comes alongside markets also pricing in only two hikes this year – rather than the three that the Fed has outlined – with the next coming in June.

USD/JPY – US Dollar Higher Ahead of Fed Announcement

In the absence of a press conference with Chair Janet Yellen following today’s announcement, investors will be left to pour over the statement that it released alongside the decision to see whether views have changed on the path of interest rates this year since the last meeting. Given that the Fed is none-the-wiser when it comes to Trump’s spending and tax plans, I would imagine the views of policy makers will be unchanged since the middle of December and they will reiterate an intention to hike three times.

With the dollar more than 4% off its post-hike highs, it could start to look attractive once again to traders as long as the Fed sticks the same script.

DXY Daily

Source – Thomson Reuters Eikon Platform

Of course, this will also be dependent on what we get from Trump today, given his ability to both excite investors and worry them on a regular basis. We’ll also get some economic data from the US throughout the day including ADP non-farm employment data and manufacturing PMIs. This will be accompanied by crude inventory numbers from EIA, with another small build expected.

Dollar Licks Its Wounds in Currency War

For a look at all of today’s economic events, check out our economic calendar.

Economic Calendar

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Craig Erlam

Craig Erlam

Senior Currency Analyst at OANDA
Based in London, England, Craig Erlam joined OANDA in 2015 as a Market Analyst. With more than five years' experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while conducting macroeconomic commentary. He has been published by The Financial Times, Reuters, the Wall Street Journal and The Telegraph, and he also appears regularly as a guest commentator on networks including Sky News, Bloomberg, CNBC and BBC. Craig holds a full membership to the Society of Technical Analysts and he is recognized as a Certified Financial Technician by the International Federation of Technical Analysts.