Yesterday, in anticipation of today's Fed interest rate decision and meeting, the dollar declined. However, the losses were limited. It seems the currency has entered a consolidation phase over the short term with the dollar index continuing to trade within a 1% range as it has done since 15th April.
Equities shrugged off losses suffered earlier in the day after Scott Bessent stated that some “very good “ offers had been made to the US from its trading partners.
*Daily move - against G10 rates at 7:00 am, 07.05.25
** Indicative rates - interbank rates at 7:00 am, 07.05.25
Markets were buoyant overnight after it was confirmed that US-China trade talks are set to take place in Switzerland this weekend. But coming into the morning some of the overnight gains on equity futures and the dollar have eased off. There are also reports that the UK and US are said to be in intensive talks that could reduce some tariffs.
Tonight’s Fed FOMC meeting is not expected to show any change in interest rates, a move that will likely frustrate Trump. Jerome Powell is expected to maintain his hawkish stance and indicate caution in cutting interest rates further. Recent data has seen markets fade the expectation of a June rate cut so we look to see if Powell's comments today continue to confirm this further.
FX moves remain in a consolidation patterns with no clear direction.
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