All eyes on the Federal Reserve

US Dollar is among the weakest G10 currencies as traders anticipate the FOMC rate decision

By Farah Mourad | 29 January 2025

Market open
  • EUR/USD steadies at 1.0440

  • Gold hovers just above $2,760

  • WTI declines to $71.00

Asian Market

Australia’s latest consumer inflation data showed a 2.4% YoY increase in Q4, marking the slowest pace since early 2021. This was slightly below the 2.5% forecast and down from the 2.8% recorded in the previous quarter. The quarterly CPI rose 0.2%, missing expectations of 0.3%.

  • A notable slowdown in housing costs contributed to the cooling of inflation, strengthening market bets on an interest rate cut from the Reserve Bank of Australia (RBA).
  • Current market pricing suggests an 80% probability of a 25bps rate cut at the RBA’s upcoming February 18 meeting.

Currencies

US Dollar: The greenback trades on the back foot, ranking among the weakest G10 currencies, as traders anticipate the Federal Open Market Committee’s (FOMC) rate decision and Fed Chair Jerome Powell’s press conference. The Japanese yen and British pound emerge as the strongest performers in early trade.

EUR/USD: The euro steadied around 1.0440 in the early Asian session, snapping a two-day losing streak. However, sentiment remains cautious ahead of the Federal Reserve's interest rate decision later in the day. Risk-off sentiment could continue to challenge the pair’s upside potential.

Commodities

Gold: Prices remain under mild pressure, trading just above $2,760 after struggling to extend the previous session’s gains. A broadly upbeat tone in global equities is weighing on the safe-haven asset, though softer US Treasury yields are limiting downside risks.

Crude Oil (WTI): Oil prices are on the defensive, trading around $71.00, down 0.25% in the Asian session. The commodity is struggling to sustain its rebound from a near three-week low amid renewed concerns over global demand:

  • Geopolitical Risks: Markets are wary of potential trade tariffs from the US targeting Canada, China, and Mexico, which could weigh on economic activity and fuel demand.
  • China’s Weak Economic Signals: The official PMI data released earlier this week reinforced signs of persistent weakness in the world's second-largest economy and biggest oil importer.
  • US Production Strategy: Washington’s push for higher domestic energy output and a potential OPEC+ response further complicate the supply-demand outlook.

Market Focus

The highlight of the day remains the Federal Reserve's rate decision, with investors closely watching Powell’s tone for cues on the central bank's policy trajectory. The Fed’s stance will likely dictate near-term moves across currencies, commodities, and risk assets