Today the markets are in anticipation mode as the Federal Reserve is gathering to discuss its monetary policy. In particular, they will talk about the number of interest rates increases for 2018 and whether to up that from three to four, as well as whether to increase interest rates right now.
An immediate interest rate increase is extremely likely. The announcement should come at 6PM today and the expected interest rate increase is of 0.25%.
Usually when the interest rate is increase the currency is supposed to find support in that and reach new highs. This worked for the dollar well enough in 2015 and 2016, but last year it stopped reacting to rate increases. Due to the overconfidence of analysts that the rate increase will occur, its impact was already priced in. Right now the markets are very confident in another rate hike, so it is possible that we see a repeat of last time and the USD drops at the announcement instead of going up.
The US economy is currently also under the influence of Trump’s newest policy that will impose tariffs on Chinese imported goods. Together with Trump’s earlier suggestion for tariffs on metal imports, this has increased economists’ fears of a global trade war.
