Beware of Fed Today
The big question this evening from the Fed is whether they will focus more on economic weakness and say that any inflation risks from higher oil prices will be temporary, meaning they will be outweighed by economic weakness and rising unemployment.
The Fed’s latest dot plot forecasts from December expected one rate cut for 2026. All eyes are on the new forecasts published today. Will they continue to expect one rate cut, or raise it to two rate cuts or no rate cuts at all? It is not unusual to hear Powell give a different view in his press conference. This is what happened at the December meeting. Powell can sound more dovish or hawkish than the dot plots.
Any hawkish suprises are expected to trigger more damage in gold, silver with upside in USDJPY. EURUSD is likely to be relatively supported compared to GBPUSD. Equity indices are seen less impacted negatively than metals in the event of a hawkish surprise.
