It’s FOMC DAY Today, Are You Ready? May 04, 2022

U.S. FOMC Interest Rate Decision

The most awaited event for the week is just a few hours away only and that is U.S. Funds Rate Decision and FOMC Press Conference scheduled at 1800 GMT/2330 IST.

The FOMC usually changes the statement slightly at each release. It’s these changes that traders focus on. FOMC statement is the primary tool the FOMC uses to communicate with investors about monetary policy. It contains the outcome of their vote on interest rates and other policy measures, along with commentary about the economic conditions that influenced their votes. Most importantly, it discusses the economic outlook and offers clues on the outcome of future votes.

Analysts will be looking for comments on the size of future rate hikes, the pace of the runoff of assets and comments on selling MBS in the future.

Let’s quickly check out the key points to keep in mind in between the rumors and expectations from the Federal Reserve:

  • Markets expect that FOMC will come up with the 50bp rate increase in the today’s meet. Does FOMC meet the expectations or not?
  • Investors are looking for the any hint on the “commencement of balance sheet runoff”.
  • Merrill Lynch expects the announcement of Quantitative Tightening (QT) starting in June. During the March FOMC Meeting Minutes, Fed detailed the plans for reducing the size of the balance sheet, indicating general agreement behind monthly caps of $60bn for Treasuries and $35bn for agency MBS phased in over three months or more.
  • According to the Goldman Sachs, Fed intends to raise the policy rate by 50bp and announce the start of balance sheet reduction.
  • Investors will therefore be paying close attention to any comments from Fed Chair Powell at the Press conference that suggests the FOMC intends to hike in 50bp increments beyond June.”
  • During March Meeting, Powell said that, “if we determine that we need to tighten beyond common measures of neutral and into a more restrictive stance, we will do that”.
  • In addition, March Meeting Minutes also signaled the committee will likely agree to start shrinking their $9 trillion balance-sheet in May, quickly moving to a maximum runoff pace of $95 billion a month.

Fed has already provided many clues for what will be likely to happen in May FOMC Meeting and the rest significant information will come via FOMC Press Conference scheduled at 1830 GMT/0000 IST.

Technical View:

XAU/USD (Gold):

  • Gold remains almost unchanged as U.S. trade balance and ADP Non Farm Employment Change data missed the expectations.
  • The next Key U.S. Fundamental will be ISM Services PMI data at 1400 GMT/1930 IST and lastly FOMC at 1800 GMT/2330 IST.
  • Today pair made intraday high at $1,872 and low at $1,861 mark.
  • A day chart and H1 chart with triple EMA suggest bearish trend for the time being.
  • A sustained close above $1,872 on H1 chart requires for the upside rally.
  • Alternatively, a consistent close below $1,858 on H1 chart will test further supports.

Take a look and do trade wisely!
Good Luck