Fed Quick Preview: Considerable chance of dollar slide

Fed Quick Preview: Considerable chance of dollar slide

The Fed is expected to taper its bond buys for the 7th time to $15 billion, in the last taper before QE end in October. Without a change in rate hike expectations, Yellen is expected to maintain the dovish approach and to disappoint USD bulls.

Some are expecting Yellen and her colleagues to alter the statement regarding the interest rates, removing the word “considerable” from the expected time frame. However, given the recent unexciting NFP, JOLTS and jobless claims numbers, there is a better chance that this critical word will remain intact.

Update:  Taper 7: Dollar shooting higher – two dissenters

Join a live coverage of the Fed decision from 17:45 GMT

Update: a day ahead of the Fed:  USD sold off across the board on Chinese stimulus, lower Fed expectations

The economic forecasts could be upgraded and the general message could be somewhat more upbeat, but Yellen might want to keep the hints about the rates to another opportunity.

This is a key event for the dollar. Every word in the statement and every word in the press conference will be scrutinized, and the full impact might take time be seen: it might await the European session on Thursday.

A surprising removal of the word “considerable” will have a considerable positive effect on USD, while no change in the statement will shift the focus to the general tone and view of the economy by Chair Yellen. Her dovish tone could weigh on the dollar.

Don’t get me wrong: I still believe a rate hike is coming to the US in the spring of 2015 rather than the summer, but the Fed is not likely to hint that right now. Not yet.

Stay tuned for a live coverage of the whole Fed event, from 17:45 GMT on Wednesday with  Valeria Bednarik of FXStreet.

In the meantime, listen to our latest podcast, where we talk about the FOMC meeting.

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Yohay Elam

Yohay Elam

Yohay Elam: Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I've accumulated. After taking a short course about forex. Like many forex traders, I've earned a significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I've worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.