The Federal Reserve is set to announce its latest rate decision at 2:00 pm ET, followed by Chair Jerome Powell’s press conference at 2:30 pm ET. The Fed is widely expected to cut rates by 25 basis points, but with a hawkish tone. This cautious approach reflects ongoing uncertainty in economic data, which should begin to clarify next week as key inflation and employment reports are released after delays caused by the government shutdown.
In addition to the rate decision, the Fed will release updated central tendency projections from officials covering the Fed Funds rate, GDP growth, unemployment, PCE inflation, and core PCE inflation. In September, the projections were as follows:
– Fed Funds rate: 3.4% (today’s update is expected to be closer to 3.75%)
– GDP growth: 1.8%
– Unemployment: 4.4%
– PCE inflation: 2.6%
– Core PCE inflation: 2.6%
Chair Powell’s press conference, typically lasting 50 to 60 minutes, will provide further insight into the Fed’s assessment of risks and the likely path for monetary policy.
For forex traders, understanding these updates is crucial, as they will influence US dollar movements and global currency markets. The overall hawkish stance suggests the Fed remains cautious about easing too quickly amid mixed economic signals.
Meanwhile, the Bank of Canada will also announce its rate decision today. Markets expect the central bank to hold rates steady at 2.25%. However, attention will focus on the tone of the statement, especially after recent stronger employment data. Traders will be looking for clues from Governor Macklem on whether the central bank may shift towards tightening or keep the door open to potential disappointments from recent economic developments.
At 8:30 am ET, the US employment cost index for the third quarter will be released, with consensus expecting a 0.9% increase. This would match the gains seen in the previous quarter and mark the fourth consecutive quarter at this level. While this suggests wages are keeping pace with inflation, the composition of wage gains may be uneven, with higher-income earners seeing the most benefit.
In economic data released earlier today, US mortgage applications rose by 4.8% following a 1.4% decline the previous week. Mortgage rates held steady at around 6.33%, unchanged from last week’s 6.32%.
In market activity, US stock futures are down ahead of the open with the Dow industrial average down 5.69 points, the S&P 500 down 1.76 points, and the NASDAQ down 32.19 points.
US Treasury yields are rising, reflecting market expectations of a cautious Fed. The 10-year yield recently moved above 4.20%, up from a low near 3.96% a few weeks ago. Current yields are:
– 2-year: 3.625% (+1.2 basis points)
– 5-year: 3.804% (+2.4 basis points)
– 10-year: 4.203% (+1.7 basis points)
– 30-year: 4.820% (+1.1 basis points)
In commodities, crude oil is trading higher by $0.15 at $58.40 per barrel. Gold prices have dropped $11.80 to $1,195.06 an ounce, while silver continues its record run with a gain of $0.46 to $61.15, having reached a new record high of $61.60 earlier in the day. Bitcoin is trading down by $600 at $92,039.
Forex traders should keep a close watch on the Fed’s rate decision and Powell’s press conference, as these will heavily influence the US dollar and shape risk sentiment across major currency pairs such as EUR/USD, USD/JPY, and GBP/USD.
Original Source: Greg Michalowski of investinglive.com
