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Forex Update: Fed's Rate Decision and New Projections Could Spark Big Moves

Forex Update: Fed's Rate Decision and New Projections Could Spark Big Moves

Here's what you should know for Wednesday, December 18

AtoZ Markets
December 18, 2024

Happy Wednesday Traders, 👋🏼

The financial markets are pretty quiet today because everyone’s waiting for the Federal Reserve to make its big announcement later. It’s their last decision of the year, and it could shape what happens in 2025.

While we wait, there’s some important news coming from Europe and the US, like inflation numbers and housing data. But for now, the major currencies aren’t making any big moves.

🔑 Key Highlights

The Federal Reserve is making a big decision today. They might cut interest rates, and we’ll also find out what they’re planning for next year.
Fed Chair Jerome Powell will talk at 7:30 PM GMT. He’ll explain their decision and share insights about what’s next.
The US Dollar hasn’t moved much—it’s sitting around 106.80. Bond yields are also staying low, below 4.4%.
Prices in the UK went up by 2.6% last month. But the British Pound didn’t react much and is still trading at nearly 1.2700.
Gold prices and major currencies like EUR/USD and USD/JPY are pretty calm. Everyone’s waiting to see what the Fed announces.

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✅ Fed Decision and Market Outlook

Investors are waiting for the Federal Reserve to announce its policy decision. The Fed is widely expected to lower the policy rate by 25 basis points to a range of 4.25%-4.5%. Additionally, the updated Summary of Projections (SEP), often referred to as the dot plot, will give insight into how many more rate cuts officials anticipate in 2025.

Fed Chairman Jerome Powell’s press conference at 19:30 GMT will also shed light on the future policy outlook. Ahead of these developments, the US Dollar Index is steady around 106.80, and 10-year US Treasury yields hold below 4.4%.

🎯 European Updates

During European trading hours, Eurostat will release revisions to November’s Harmonized Index of Consumer Prices (HICP). Meanwhile, UK inflation data showed that the Consumer Price Index (CPI) rose to 2.6% in November, matching expectations. However, the core CPI slightly missed projections, increasing by 3.5% instead of the expected 3.6%. GBP/USD showed little reaction and continues to trade near 1.2700.

🔍 Market Trends

EUR/USD: The pair continues to trade in a narrow range above 1.0500 after minor losses on Tuesday.
USD/JPY: After snapping a six-day winning streak on Tuesday, the pair remains stable at around 153.50.
Gold (XAU/USD): Prices remain confined below $2,650, with little movement seen in early Wednesday trading.

Forex Heatmap

👀 What to Watch

In addition to the Fed’s decisions, November’s Housing Starts and Building Permits data in the US will be released. These updates, alongside Powell’s remarks, are likely to influence market direction in the coming days. Keep an eye on currency pairs and gold prices for potential volatility after the Fed announcement.