Major Market Moves: FOMC, CPI & Fed Signals – What Traders Must Know This Week!

This week presents major market-moving events, with the FOMC, BOE, and European CPI in focus. Traders should prepare for significant volatility.

FOMC Decision

The Federal Reserve is widely expected to hold rates steady, with CME FedWatch Tool indicating a 99% probability of a pause. However, the key market driver will be Jerome Powell’s post-meeting commentary. Any shift in tone regarding future rate cuts could impact USD strength. The slightest deviation in language could alter expectations dramatically.

The US dollar has consolidated leading up to this event, a typical pattern before major central bank decisions. If Powell leans hawkish, expect USD strength, while dovish remarks may weaken the currency.

BOE Rate Decision

The Bank of England is expected to cut rates by 25 to 50 basis points. While this move is anticipated, the rate statement will be crucial in determining GBP direction. The BOE has maintained a dovish stance, yet GBP has strengthened against the USD. However, against JPY, it has struggled. The rate statement’s tone will dictate whether GBP continues its upward momentum or begins a correction.

European CPI Impact

Inflation data from Europe is expected to come in slightly lower than the previous reading. If confirmed, this supports the ECB’s ongoing rate-cut outlook. However, geopolitical factors, such as the Ukraine conflict and potential tariff implementations, could affect inflation trajectories. Falling gas prices have contributed to declining inflation, making ECB policy more accommodative. If inflation surprises to the downside, it could reinforce bearish sentiment on EUR/USD.

Trading Considerations

• EUR/USD: Approaching key resistance around 1.10; potential reversal zone if CPI disappoints.
• GBP/USD: BOE stance crucial; expect volatility based on forward guidance.
• USD/JPY: Consolidation ahead of FOMC; a break may indicate USD’s directional bias post-decision.
• Equities: Potential volatility in US stock indices depending on Powell’s tone.

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