Long USD could be an interesting trade from the Fed rate decision
There’s no change expected from the US Federal Reserve tonight on the Federal Funds Rate, but we could certainly hear a hawkish message. This may have the impetus of driving up the dollar.
The Fed hasn't raised its rates since July, but the threat of more increases has seen indices fall over the past two months, while Treasury yields have been hovering around 16-year highs, dating back to the early days of the financial crisis. While much of those fears have centred around how much higher rates could go, and how long the Fed will keep them elevated, Jerome Powell's post-meeting news conference, as well as the FOMC statement, could move markets.
(AI Video Transcript)
The US Federal Reserve
The US Federal Reserve is not expected to change its interest rate, which is predicted to stay between 5.25 and 5.5%. This is causing concern among investors as the possibility of future rate increases has led to a decline in various industries. The impact of the interest rate decision, as well as Federal Reserve Chairman Jerome Powell's news conference and the accompanying FOMC statement, could potentially affect the markets and the value of the USD.
The US dollar
The US dollar has been relatively strong and has shown a slight increase today. It is currently in the upper range of a blue channel on a chart, which is being closely monitored. The dollar has been moving in a smaller downward trend within a larger upward trend that started on July 18th. Traders are eagerly awaiting the outcome of the interest rate decision to determine the next direction for the dollar.
The Euro
On the other hand, the EUR has declined for two consecutive days and is currently valued at 1.0568 against the US dollar. The decision made by the US Federal Reserve, along with other factors, is likely contributing to the euro's weakening against the dollar. This situation is significant for potential traders as it can influence their decision-making process on whether to invest in the US dollar or the euro.
The outcome of the interest rate decision and the actions of the Federal Reserve could have repercussions on various industries and affect the value of different currencies. It is important to pay attention to these factors and stay informed to make informed trading decisions.
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
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