The US Federal Reserve has established a reduction in interest rates because Trump's policy shapes economic perspectives

It is widely expected that the federal reserve will leave monetary policy settings unchanged after the January meeting.
Presser chairman Fed Powell can provide significant tips on rate forecasts.
The American dollar may be under the pressure of bear if the Fed leaves the rate lowering in March on the table.

The United States Federal Reserve (USA) will announce decisions regarding monetary policy after the first political meeting of the year on Wednesday. Market participants generally predict that the American central bank will leave monetary policy settings unchanged after lowering the interest rate by 25 base points (BPS) to 4.25% -4.5% in December.

The CME Fedwatch tool shows that investors practically see no chance to reduce the rate in January, while the valuation in 33% likely to reduce by 25 BPS in March. Hence, the language and comments of the FED chairman Jerome Powell can lead to the valuation of the American dollar (USD), not the announcement of interest rates.

“It is expected that FOMC will maintain its political decision unchanged at 4.25% -4.50% next week, and the chairman of Powell expected to convey what can be a cautious process in creating politics on the close to the horizon, while supporting mild prejudice” -said TD Securities Analysts of the Fed event. “In our opinion, the decisions of FED officials, although still very dependent on the data, are becoming more and more dependent on Trump,” he added.

Economic indicator

Decision on the FED interest rate

. Federal reserve (Fed) considers monetary policy and decides on interest rates at eight previously directed meetings a year. It has two fines: maintaining inflation at 2%and maintaining full employment. His main tool to achieve this is to determine interest rates – both in which they borrow banks, and banks borrow each other. If he decides to boost the rates, the US dollar (USD) tends to strengthen because it attracts more influx of foreign capital. If it reduces the rates, it tends to weaken USD when capital exhausts to countries offering higher returns. If the rates remain unchanged, the attention is paid to the tone of the Federal Statement of the Open Market Committee (FOMC) and whether it is hawk (expected higher future interest rates) or pigeons (expected lower future feet).

When the Fed announces the decision on the interest rate and how can it affect EUR/USD?

The US Federal Reserve is to announce a decision on the interest rate and publish a monetary policy declaration on Wednesday at 19:00 GMT. Then the Fed Fed Jerome Powell press conference begins at 19:30 GMT.

The changed summary of economic forecasts (SEP), also known as Dot, published after the December political meeting showed that decision -makers forecast two 25 BPS rate points in 2025 and expectations for higher inflation were the main reasons for forecasting a slower politics path.

The most likely Fed scenario is to repeat the approach to politics and officials dependent on the data to wait for the trade of US President Donald Trump and other economic policies. “We expect significant changes in politics, we must see what they are and the effects to get a more pronounced picture,” said Powell in December Presser.

In the event that Powell accepts an hopeful tone with the perspective of inflation after Trump refrained from applying one one tariffs and expressed readiness to work with China in commercial matters, markets can see this as a sign indicating a reduction in the rate in March and weighs USD with immediate reaction. On the other hand, investors could take a cautious position if Powell talks about the potential undesirable effects of the proposed 25% of tariffs on imports from Canada and Mexico, two largest exporters in the USA, for inflation. In this scenario, USD can gather strength against her rivals.

Eren Sengezer, the main analyst of the European session in FXStreet, provides miniature -term technical perspectives for EUR/USD:

“EUR/USD remains technically stubborn on the daily chart, and the relative strength indicator (RSI) increases above 60 for the first time since the end of September. In addition, the pair stays comfortable above 50-day and 20-day straight average movable (SMA). “
“On the other hand, Fibonacci 38.2% of the output level from October-Style is equalized as the first level of resistance to 1.0580 before 1.0670-1.0700 (50% of Fibonacci recovery, 100-day SMA). In the event that the pair falls below 1.0440 (50-day SMA, fibonacci 23.6% drainage) and begins to exploit this level as resistance, technical sellers can take action and open the door to an extended slide in the direction of 1.0350 (20-day Sma ) and 1.0200 (Lewy Lewy Lewy).