Early Thursday, January 29th, the Federal Reserve concluded its two-day monetary policy meeting and announced it would maintain the target range for the federal funds rate between 3.5% and 3.75%, aligning with widespread market expectations. The Federal Open Market Committee (FOMC) statement noted that in this decision, two Fed Governors, Stephen Milan and Christopher Waller, dissented, as they favored a 25-basis-point rate cut. The statement indicated that current measures show US economic activity continues to expand at a solid pace, job gains have moderated but remain strong, the unemployment rate has shown signs of stabilization, and inflation remains elevated. The FOMC reiterated its commitment to achieving maximum employment and the 2 percent inflation goal over the longer term. The statement acknowledged that the economic outlook is uncertain, and the Committee remains highly attentive to inflation risks. In assessing the appropriate stance of monetary policy, the FOMC will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of its goals. The statement added that the Committee's assessments will take into account a wide range of information, including readings on labor market conditions, inflationary pressures, and inflation expectations, as well as financial and international developments.
In the subsequent press conference, Chairman Jerome Powell stated that the outlook for economic activity has "improved noticeably" since the last meeting, and that both the upside risks to inflation and downside risks to employment "have diminished." Powell noted that the current policy stance is "appropriate" and is helping to drive progress toward the dual mandate goals. He emphasized that policy is not on a preset course, and future decisions will be made "meeting by meeting" and will be guided by the data. He revealed that the decision to hold rates steady garnered broad support among Committee participants. Powell characterized the US economy as being on a "solid footing," benefiting from spending related to artificial intelligence. The labor market is likely "stabilizing," while also showing continued signs of cooling. On inflation, he said the performance has been "broadly in line with expectations," with the disinflation trend in core services seeming to persist, but inflation "is still running a bit above target." He specifically mentioned that the December core PCE inflation reading might show a 3% increase, attributing some of the upside surprise to "one-time price increases" from tariffs, with the core PCE reading slightly above 2% after excluding that effect. He anticipates the impact of tariffs on goods to peak this year and subsequently recede.
Data to be watched today include the Eurozone's January Economic Sentiment Indicator, the final reading of the Eurozone January Consumer Confidence Index, the US Trade Balance for November, US Initial Jobless Claims for the week ending January 24th, the US Factory Orders Monthly rate for November, and the final US Wholesale Inventories Monthly rate for November.
**USD Index** The US Dollar Index edged higher yesterday with a slight daily gain, currently trading around 96.30. Besides short-covering providing some support, the Fed's expected decision to hold rates steady, coupled with Chairman Powell's relatively hawkish tone, were key factors underpinning the rebound. Additionally, comments from US Treasury Secretary Besant, which downplayed the impact of President Trump's recent remarks expressing no concern about a weaker dollar, also offered some support to the currency. Today, resistance is seen near 96.80, while support lies around 95.80.
**EUR/USD** The Euro declined yesterday, narrowly holding above the 1.1900 level and currently trading around 1.1960. Apart from profit-taking exerting some downward pressure, the US Dollar's strength, supported by the Fed's inaction and other positive factors, was a significant element weighing on the Euro. Furthermore, dovish comments from European Central Bank officials also contributed to the selling pressure. Resistance is anticipated near 1.2050 today, with support around 1.1850.
**GBP/USD** The British Pound retreated yesterday, closing slightly lower and currently trading around 1.3800. In addition to profit-taking, the primary reason for the Pound's decline was the US Dollar's rebound, fueled by the Fed's decision to maintain rates and optimistic commentary from Fed officials. However, market expectations that the Bank of England is in no rush to cut interest rates limited the pair's downside. Today, resistance is seen near 1.3900, while support is found around 1.3700.
Comments