The Fed will start its two-day monetary policy meeting on Tuesday, during which the members will recap the past year and make its forecasts for GDP, labor market, employment and interest rates for the coming years. It will be an important and long-running event as it will determine, at least for the first quarter of next year, the bank's overall view of the economy.
Tomorrow's release of consumer inflation data in the US will not go unnoticed either as expectations are a 7.3% rise in CPI y/y and 0.3% m/m. But if the figures show a decline, inflationary pressures will ease, which is good for the economy. This may give the Fed a strong reason to reduce the rate hike after Wednesday's 0.50% increase.
In the event of such a scenario, a strong rally in stock markets will occur, accompanied by a decline in dollar and Treasury yields.
But if the CPI data exceed expectations, demand for equities will dip, while dollar will surge
Forecasts for today:
USD/JPY
The pair remains trading within the range of 135.80-138.00. It will not go out until the release of the US consumer price index.
USD/CAD
The pair is trading within the range of 1.3535-1.3700. It will not go out until the release of the US consumer price index and the Fed monetary policy meeting.
