On May 7, ATFX reported that at 2:00 AM Beijing time, the Federal Reserve announced its April interest rate decision, keeping the benchmark rate unchanged within the range of 3.5% to 3.75%, in line with market expectations. Following the data release, the EUR/USD pair fell from 1.1685 to a low of 1.1675 within one minute, a movement of 10 basis points.
At 2:30 AM Beijing time, Federal Reserve Chair Powell held a monetary policy press conference. Market attention was divided between economic issues and his own future role. Powell stated that after stepping down as chair on May 15, he would remain on the Fed's Board of Governors. However, he intends to keep a low profile, neither acting as a "shadow chair" nor becoming a high-profile dissenter.
Regarding interest rate adjustments, Powell indicated that he does not rely solely on the dot plot. Current inflationary pressures have led the Fed to adopt a wait-and-see approach, with no immediate need for a rate hike. This stance aligns with Powell's consistent strategy of maintaining interest rate stability and avoiding premature hikes or cuts.
During Powell's remarks, minute-by-minute fluctuations in the EUR/USD pair were relatively subdued. One reason is that this was Powell's final interest rate decision as chair, reducing the significance of his views on the economy and interest rates. Instead, the perspectives of his successor, Kevin Warsh, are expected to carry greater impact.
Later today at 19:00 and 20:15 Beijing time, the Bank of England and the European Central Bank will announce their respective interest rate decisions. The prevailing expectation is that both central banks will hold rates steady, refraining from adjusting their benchmark rates. Given the limited market reaction to the Fed's decision, it is anticipated that the announcements from the BoE and ECB will also have a muted effect on market movements.
Half an hour after each decision is released, both central banks will hold their own monetary policy press conferences, which are likely to be the main focus of the day. European nations are grappling with the impact of high oil prices, and failure to act preemptively could lead to a significant rise in inflation in the coming months. However, since Fed Chair Powell has consistently asserted that the effect of rising energy costs on inflation is temporary, central bank officials in the UK and the Eurozone appear to share a similar view. As a result, central banks across Europe and the US have tacitly agreed to maintain their current policy stance.
International oil prices have surged above $110 per barrel, and escalating tensions between the US and Iran could potentially evolve into a prolonged conflict. The current decision by the Fed, BoE, and ECB to keep rates unchanged carries significant inflationary risks. Therefore, the remarks made by the central bank chairs during their press conferences will be crucial, particularly regarding what level of inflation would prompt a shift in monetary policy.
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