An eventful few days lie ahead as the US Federal Reserve meets to set interest rates and earnings season steps up a gear. The Fed's rate decision on Wednesday comes amid intense pressure from Donald Trump on chair Jay Powell to cut the cost of borrowing. Meanwhile, four of the ‘magnificent seven’ group of leading technology stocks are due to report results – Meta, Microsoft and Tesla on Wednesday, followed by Apple on Thursday.
US Federal Reserve interest rate decision
Wednesday 28 January
The Federal Reserve is expected to leave interest rates unchanged at a target range of 3.5% to 3.75%. Markets are pricing in a 95% probability of a rate hold, according to the CME's FedWatch tool. Most forecasts point to the next rate cut coming in June or July, after a new Fed chair takes the reins. Powell is due to step down in May when he completes his second term as chair. Recent economic data from the US has painted a picture of resilience in the labour market and consumer spending, bolstering expectations that the Fed will refrain from cutting rates until later this year. That said, Powell’s press conference after the rate announcement still has the potential to move markets, particularly if he comes across as more hawkish (favouring higher rates to tackle inflation) than dovish. Forex markets such as EUR/USD may be especially susceptible to fluctuations based on any signals or hints from Powell. The EUR/USD technical chart, below, suggests that the euro could be poised to strengthen against the dollar. Having bounced off the 200-day simple moving average (SMA) in the past week, the pair is now running into resistance near $1.1760. This is an important area as it marks the spot where the euro’s rally stalled in December. If the euro moves past the previous highs around $1.18, it may rise towards $1.19. However, failure to break through resistance could lead to the formation of a bearish head-and-shoulders pattern, which might trigger a slide back down towards the 200-day SMA near $1.16.
