Fed’s Rate Decision & Janet Yellen’s Clues On The Next Rate Hike

The big day is finally here, few hours and the world will brace for another important decision by the Federal Reserve, which will be announced at 18:00 GMT+ followed by the Press Conference of the Federal Reserve Chair Woman Janet Yellen at 18:30 GMT+.

Despite the fact that the market is almost 100% sure that the Federal Reserve will raise the Fed Fund rate by 25bps, this doesn’t mean that the US Dollar rally may continue right after the decision. There are many factors traders need to keep in mind.

The Rate Hike Is Priced In

As we noted before in our previous reports, the Fed Fund Futures is pricing in 100% chance of a rate hike since more than two weeks, when the US Dollar index recovered from 100.0 all the way to 102.20 last week.

Therefore, traders should not expect a massive rally once the decision is announced, unless the Fed surprise the market with more than a rate hike, such as upgrading GDP, Inflation and Unemployment outlook.

What Matter’s The Most In Today’s Decision

The rate hike itself is an old news according to the Fed Fund Futures. However, there are things that everyone should be looking for

The YoY economic releases for the US wasn’t encouraging enough recently, even Atlanta Fed had to cut Q1 GDP to below 2% in the past few week, which increases the chances that the Fed would downgrade its inflation and growth outlook for this year, especially after the rate hike in December and in March.

As for Yellen’s remarks, it will be crucial for everyone, as we will be looking for any clues regarding the timing of the next action. So far, the market believes that the next rate hike might come in June or later.

If this case was approved or mentioned by Janet Yellen, this should be the catalyst for another leg lower in USD across the board.

The Fed Will Be Very Careful