could the fed disappoint dovish expectations 1808702016

The US dollar has drifted steadily lower in recent days as markets have waited in eager anticipation for the Fed’s monetary policy statement scheduled after its two-day meeting concludes on Wednesday afternoon.

As the Fed has become increasingly dovish since its December rate hike, and in recent weeks and months has essentially led financial markets to rule out an April hike through its members’ mostly dovish public comments, the stage has been set for further delays in the Fed’s monetary tightening plans.

These dovish expectations have been further supported by lackluster inflation and economic growth data, both in the US and globally, during the month of April. With key US inflation data as well as numbers for retail sales, manufacturing, durable goods orders, and consumer confidence all falling short of expectations, the prospects for a near-term Fed rate hike have progressively dwindled.

With this backdrop, Fed-watchers will be closely honed-in on any language that could imply the possibility of a June rate hike. Currently, while the Fed Fund futures market has priced-in only a 2% probability of a rate hike today, the current probability of a June hike stands at over 20%. Of course, this probability could change markedly based upon what comes out of Wednesday’s FOMC statement.

The possibility still exists, however, that the Fed could present some hawkish surprises that could jolt the financial markets. This could especially be the case since market expectations are so heavily skewed towards the dovish side. If this turns out to be the case, a volatile move is likely to occur, especially with respect to the US dollar, dollar-denominated commodities like gold and silver, as well as the major US equity indices.

The primary currency markets to watch today with respect to the afternoon’s Fed decision include USD/JPY and NZD/USD, as the Fed statement will also be followed by policy statements from the Reserve Bank of New Zealand and the Bank of Japan, both of which have the potential to present significantly market-moving decisions.

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

StoneX Financial Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit www.cityindex.com/en-sg/terms-and-policies for the complete Risk Disclosure Statement.

ALL TRADING INVOLVES RISKS. LOSSES CAN EXCEED DEPOSITS.

City Index is a trading name of StoneX Financial Pte. Ltd. (“SFP”) for the offering of dealing services in Contracts for Differences (“CFD”). SFP holds a Capital Markets Services Licence issued by the Monetary Authority of Singapore for Dealing in Exchange-Traded Derivatives Contracts, Over-the-Counter Derivatives Contracts, and Spot Foreign Exchange Contracts for the Purposes of Leveraged Foreign Exchange Trading. SFP is also both Derivatives Trading and Clearing member of the Singapore Exchange (“SGX”). SFP is a wholly-owned subsidiary of StoneX Group Inc.

The information provided herein is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to invest, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. 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.

The information does not represent an offer of, or solicitation for, a transaction in any investment product. Any views and opinions expressed may be changed without an update. To understand the risks and costs involved, please visit the section captioned “Important Information” and the “Risk Disclosure Statement”.

The information herein is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.

StoneX Financial Pte. Ltd. 1 Raffles Place, #18-61, One Raffles Place Tower 2, Singapore 048616. Tel: 6309 1000. Co. Reg. No.: 201130598R.

This advertisement has not been reviewed by the Monetary Authority of Singapore.