The financial markets are starting the week in a steady mode as investors wait to see what the will do. Most expect a 25 basis point rate cut, with over an 85% probability. If there’s no surprise, the focus will shift to the Fed’s guidance on future moves after the new year.
Meanwhile, delayed US economic data is coming in, including the important , while we still await and figures. In currency markets, has been moving sideways since June, and a neutral Fed statement is likely to keep it stable until the next key data is released.
Powell’s Final Months at the Fed
Next month, the Federal Reserve will get a new chairman, likely Kevin Hassett, President Trump’s economic advisor. With new leadership, the Fed could move faster on cutting interest rates, which Trump wants. Until then, Jerome Powell may continue rate cuts, but only if the labor market shows signs of slowing.
The market is already expecting a cut as soon as tomorrow, based on recent dovish comments from Fed officials. These public statements are meant to prepare investors and avoid surprises at the meeting. While internal discussions and new data could still influence the decision, everything points to the Fed following the guidance it has already given.
PCE Inflation Continues Rebound
At the end of last week, the delayed data for the September PCE index was released. The results matched expectations, showing that the inflation increase that started in May is continuing.
This shows that the Fed is focused on its dual mandate: controlling inflation while supporting economic growth and the labor market. In the coming months, labor market data will be closely watched by investors and could prompt further rate cuts, even if inflation remains steady.
EUR/USD in the Center of Consolidation
Inside the wide sideways range between 1.14 and 1.19, the main currency pair is shaping a head and shoulders pattern. The pair is trading near the middle of this range right now.
As markets wait for the Fed decision, the pair is likely to stay close to the neckline near 1.1670. A firm move above 1.1720 would break the pattern and create room for a push toward 1.19. This move can happen in the short term if the market reads the Fed’s message as dovish.
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