4 min readThe Federal Reserve has decided to keep interest rates unchanged at 4.25%—4.5%, which was in line with expectations as the central bank sticks with its wait-and-see stance to assess the impact of Trump’s trade policies. However, the Fed has changed its outlook, lifting its inflation forecast while lowering growth forecasts and warning about rising uncertainties. This is a stagflationary outlook. The Fed’s dot plot pointed to two 25-basis point rate cuts this year.
The Fed lifting inflation forecasts could be considered a slightly more hawkish stance. Policymakers see inflation ending 2025 at 2.7%, up from 2.5% previously forecast. The Fed targets inflation at 2%. The market is pricing in a 62% probability of the next rate cut coming in June.
This meeting provoked a mixed reaction from the market, with stocks and the USD rising.
DOLLAR INDEX (DXY):
Post the release of the rate decision, we have seen the Dollar Index rise 0.3%, which has correlated to a 0.45% decrease in EUR/USD. DXY rose to a peak of 103.90 before easing back to 103.75. The DXY still hovers around a 5-month low.
Source: https://www.tradingview.com/x/bVFlON94/
EURO VS DOLLAR (EUR/USD):
If we take a closer look at the technicals, we can observe how EUR/USD has fallen further from the 1.0945 resistance and is testing the support of the 50 SMA on the 4-hour chart. A break below here could spur further declines.
Source: https://www.tradingview.com/x/wEWh3xyf/
S&P 500 (SDX):
The S&P 500 has also seen a direct impact from this Fed rate announcement, rising even as the Fed lifted its inflation forecast. The price was trading at just over 5657 before the announcement, and currently we are trading just above 5675.
Author
Risk DisclaimerThe financial products offered by the Company are complex and come with a high risk of losing money rapidly due to leverage. These products may not be suitable for all investors. Before engaging, you should consider whether you understand how these leveraged products work and whether you can afford the high risk of losing your money.
The Company does not accept clients from the Restricted Jurisdictions as indicated in our website/ T&C. Some services or products may not be available in your jurisdiction.
The applicable legal entity and its respective products and services depend on the client’s country of residence and the entity with which the client has established a contractual relationship during registration.
