The Federal Reserve’s stance is under scrutiny as its latest economic forecasts and policy signals shape market expectations. While no immediate policy changes are anticipated, Chair Powell is likely to reaffirm the Fed’s cautious approach, emphasizing patience amid economic uncertainties. The Summary of Economic Projections will be key in understanding officials' perspectives. Market positioning ahead of the FOMC decision has led to short-covering, strengthening the US dollar against major currencies. European dollar-selling pressure appears to have eased, and investors remain focused on upcoming Fed statements for guidance on future economic trends.

Asia Pacific Markets

The Bank of Japan maintained its monetary policy stance, with Governor Ueda highlighting concerns over potential US trade measures. Japanese economic data reflected a slow start to the year, with core machine tool orders falling significantly. The yen experienced volatility, briefly surpassing JPY150 against the dollar before retracing due to strong resistance.
Meanwhile, the Chinese yuan remains near its lowest level since the US election. The People’s Bank of China kept the loan prime rates unchanged, indicating a preference for fiscal measures over monetary easing.

European Markets

The euro fluctuated in response to US housing data, initially dipping below $1.09 before rebounding.
The currency remains sensitive to shifts in the US-German bond yield spread, which has recently widened, lending support to the dollar. Political developments in Germany, including fiscal policy decisions, may influence the euro’s trajectory.
Meanwhile, the British pound saw fluctuations, testing key resistance levels near $1.30. The UK labor market shows signs of gradual softening, but the Bank of England is not expected to adjust interest rates in the near term. Market expectations for a rate cut in May remain uncertain, with investor focus on upcoming economic reports.

American Markets

The US dollar index saw fluctuations, with recent lows near 103.20 before rebounding in Asia-Pacific trading. The Federal Reserve’s meeting remains the primary market driver, as investors assess the central bank’s outlook. Growth projections have been revised downward, with inflation expectations remaining firm. The Fed’s previous median projection suggested two rate cuts this year, though uncertainty persists. Speculation around balance sheet adjustments has diminished following recent fiscal agreements. As markets adjust positions ahead of the FOMC outcome, traders are closely watching policy signals to determine the Fed’s future course of action and its implications for currency movements.