On Wednesday, April 29, the US dollar appeared to find firmer footing ahead of the Federal Open Market Committee (FOMC) statement. This momentum was partly supported by fluctuations in the US stock market. Powell's final press conference as Chair is not expected to cause significant turbulence. However, given the lack of progress in the Gulf situation, Powell may adopt a more assertive stance. Meanwhile, the concentrated release of earnings reports from major technology companies today could impact the foreign exchange market as much as, or even more than, the Fed's announcements.
The US dollar may face upside risks. Over the past 24 hours, the dollar has recovered. While concerns about the lack of progress in US-Iran negotiations persist, this does not appear to be the primary driver. In fact, tensions between Iran and the US have escalated since late February, with the blockade of the Strait of Hormuz pushing Brent crude prices to around $111 per barrel, severely disrupting global energy supplies.
The dollar's rebound seems more linked to stock market volatility driven by concerns over the artificial intelligence outlook. A key trigger was a report that OpenAI failed to meet internal growth and revenue targets, which weighed on leading AI-related stocks like NVIDIA, Broadcom, and Micron Technology, subsequently pressuring the Nasdaq Composite Index to its largest single-day decline in nearly a month.
Ultimately, the dollar's rebound was short-lived. This recovery may be related to month-end capital flows. Month-end rebalancing often brings brief technical dollar buying, but this does not signify a fundamental shift in the market's medium to long-term assessment of the dollar's fundamentals.
Regarding the Middle East situation, the market awaits a response from Tehran. The President claimed on social media that Iran is in a "state of collapse" and is eager to reopen the Strait of Hormuz quickly. This contrasts subtly with reports from The Wall Street Journal about internal White House preparations for a prolonged Strait blockade, indicating that the negotiation outlook remains highly uncertain, and markets should not expect a swift resolution.
A notable recent development is that several tankers have successfully transited the Strait of Hormuz despite ongoing tensions, including a Japanese supertanker that passed through after coordination with Iran. This is interpreted by the market as a limited signal of gradual easing, but analysts widely caution that route safety remains uncertain until a formal political agreement is reached.
Another significant market-moving news is the UAE's announcement of its withdrawal from OPEC and OPEC+, effective May 1. The UAE characterized the exit as a sovereign decision based on "national strategic interests," emphasizing it reflects its long-term strategic vision and the evolving energy landscape. As OPEC's second-largest producer, this departure is a serious blow to the nearly 60-year-old cartel.
The UAE's Energy Minister noted in an interview that, given the Strait of Hormuz remains closed, the immediate impact on oil prices is relatively limited. In the long term, however, the move will grant the UAE greater freedom to increase production, potentially releasing an additional one million barrels per day after the Strait reopens.
A chief climate and commodities economist at Capital Economics stated that the bonds between OPEC member states have loosened, and conflict involving Iran could act as a catalyst for the organization's eventual disintegration. From a forex perspective, expectations of OPEC's structural disintegration could exert medium-term pressure on currencies of oil-exporting nations while potentially dampening inflation expectations, providing some breathing room for global central banks.
The core market focus today is the Fed's interest rate decision scheduled for 2:00 PM Eastern Time. Markets have fully priced in a 100% probability of the Fed holding rates steady, with the benchmark rate expected to remain in the 3.50% to 3.75% range, unchanged since last December.
Inflation adds complexity to the Fed's position. March CPI hit 3.3%, a two-year high, driven primarily by soaring energy prices. Meanwhile, Q4 2025 GDP, after three revisions, stood at just 0.5%, presenting a classic "stagflation dilemma" – rising prices alongside slowing growth, leaving the central bank in a difficult position. Due to rising fuel and air freight costs, markets expect CPI could approach the 4% range. However, the Fed views this as a temporary supply-side shock rather than demand-pull inflation. Compared to the pandemic era, current supply disruptions are more limited in scope, household real income is under pressure, and the risk of secondary effects from a wage-price spiral is relatively contained.
The Fed is likely to maintain its consistent stance – that it is too early to judge the balance between inflation and growth or the future path of monetary policy. Analysts note that the baseline scenario for this Fed meeting is a "hawkish hold" – not that the Fed intends to tighten further, but that Powell lacks justification to signal easing amid high oil prices and above-target inflation.
However, recent news from the Middle East is not encouraging. This makes Powell's choice of wording during his press conference particularly crucial. Powell may acknowledge the increasing difficulty of balancing the Fed's dual mandate – inflation risks are rising due to energy shocks, while growth risks are also accumulating. This supports a monetary policy framework of "remaining patient and not pre-committing to a rate-cut path." Markets are loosely pricing in one or two rate cuts in the second half of the year, which Powell is unlikely to explicitly endorse.
More notably, this is likely Powell's final press conference as Fed Chair. His term expires on May 15, and the Senate Banking Committee is scheduled to vote on the President's nominee for his successor this Wednesday. With the Department of Justice having dropped its criminal investigation into Powell, the main obstacle to confirming the nominee has been removed. In this context, Powell's press conference may serve less as clear guidance on future policy and more as a concluding statement on his place in monetary policy history. But this precisely means he has ample motivation to defend institutional independence before departing – emphasizing that policy should be data-driven, not political, and applying the brakes to expectations of premature easing.
Economists from a major bank recently wrote that the Fed will "stand firm on holding steady" at the April meeting and believe "Powell's tone could lean hawkish."
If the Fed delivers unexpectedly hawkish signals that strengthen the dollar, US stocks could face significant pressure. Today, with Alphabet (Google), Microsoft, Amazon, and Meta Platforms all reporting quarterly earnings, the US stock market faces another major test.
These four tech giants are projected to collectively spend between $600 billion and $645 billion on AI capital expenditures in 2026. The market is eager to see if these massive investments translate into tangible revenue and profit growth. Following the report that OpenAI missed internal growth targets, investor patience is wearing thin – they need proof that large-scale bets on data centers, GPUs, and AI products are starting to pay off, not just consuming capital on the books.
Analysts are particularly optimistic about Meta Platforms, expecting Q1 EPS of $6.65 and revenue of approximately $550 billion, representing 32% year-over-year growth; none of the 42 analysts covering the stock have a "Sell" rating. However, Meta's core risk lies in its near-total reliance on advertising revenue, making it directly vulnerable to macroeconomic fluctuations, while its aggressive AI capital expenditure plan leaves little margin for safety in profitability.
From a forex market perspective, the impact pathway of tech earnings on currencies mirrors that of the Fed: better-than-expected earnings could boost US stocks, reducing safe-haven demand for the dollar and benefiting high-beta currencies; disappointing earnings could trigger risk-aversion, simultaneously driving dollar strength and stock declines, creating a resonance effect. The current earnings season overall shows strong momentum, with about 80% to 85% of S&P 500 companies beating profit estimates, and the technology sector's profit growth reaching 45%, providing important fundamental support for stocks.
In summary, the forex market faces a rare situation of overlapping "dual event risks" today. If both a hawkish Fed tone and disappointing tech earnings materialize simultaneously, technical overbought pressure on the dollar could lead to even more complex price action. Traders are advised to cautiously manage position sizes ahead of key time windows and closely monitor the real-time wording from Powell's press conference, as well as the movement in tech stock futures following the evening earnings releases.
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