Will the Fed signal higher for longer?

The Fed is widely expected to maintain rates at 5.5% and investors anticipate a more hawkish tone from Jerome Powell

By Nadia Elbilassy | @Nadia Elbilassy | 1 May 2024

Market close
  • USD strengthens ahead of Fed meeting, approaching November peak.

  • Euro weakens after initial gains on Eurozone data, trades around 1.0655 vs USD.

  • USDJPY rebounds to 158.00, recovering from Monday's low of 154.48.

What’s moving markets?

The U.S. dollar slightly strengthened on Wednesday, approaching its November peak, as investors awaited the outcome of the Federal Reserve's latest policy-setting meeting.

The Fed is widely expected to maintain rates at 5.5%. with Powells speech to be the main focal point to provide insights into the interest rate trajectory for the year ahead, with markets currently pricing in only one rate cut for 2024.

Another key event, that will be under the spotlight for the week is the non-farm payroll date, with expectations of strong pace of job growth of 236K expected vs 303K in March.

The euro weakened after initially gaining ground on robust Eurozone GDP and French CPI data, slipping below 1.07 to trade around 1.0655 against the dollar.

The USDJPY continued its rebound, testing 158.00 amid broad dollar strength, rebounding from Monday's post-intervention low of 154.48.

Yesterday, US stocks experienced significant declines following an unexpected increase in the Q1 Employment Cost Index, adding more pressure on the Federal Reserve.

Asian markets mirrored the weak US close, with Japan's Nikkei continuing its downward trend after its worst month since December 2022. Meanwhile, China and certain parts of Europe were closed for Labor Day holidays.

Moreover, a stronger dollar also weighed on commodities with Brent July trading around $85.60, whilst gold prices broke the key support of $2300 to touch lows of $2281.