The “greenback” is extremely strong. Overview for 04.05.2022

EURUSD continues trading near its lows; market players are waiting for the US Fed’s decisions.

The major currency pair remains weak on Wednesday. The current quote for the instrument is 1.0518.

So, the zero hour has come. The 2-day meeting of the US Fed will be over later today, which means that investors will finally find out the regulator’s plans relating to the benchmark interest rates. Average market expectations imply a 50-point rate hike, up to 0.75-1.00%. At the same time, the Fed may start cutting its own portfolio. 

Any deviations from these expectations will be a surprise for investors and may force increased volatility in the market. 

Probably, this year the Fed’s rate might rise after each meeting – 6 times, including today. The only question is by how much, and the May session might give an answer. 

Investors should follow any comments about inflation and its prospects, and they may immediately include some of these comments into prices. So far, the CPI data is looking quite aggressive, so the Fed’s tone might remain rather “hawkish”.

No matter what, today’s evening is promising to be very disturbing and volatile. 

The Fed’s meeting may outshine the US labour market data for April: the first report, the ADP Non-Farm Employment Change, is scheduled for today. There is no direct correlation between today’s report from ADP and the NFP to be released on Friday, but the former still provides a general impression of what is going on in the labour market.