Octa’s market snapshot: The Fed is stuck between recession and high inflation

Key takeaways

● The Fed is expected to leave rates unchanged at their meeting on
30 April – 1 May.

●
The BEA report showed that GDP growth
slowed to 1.6% in the first quarter, well below expectations.

● Fed’s preferred inflation rose for the third month in a row.

● The released GDP and Fed’s preferred inflation data sets are
hawkish, which means the U.S. dollar will likely continue to strengthen.

On 30 April – 1 May, the Federal Open Market Committee (FOMC) of
the U.S. Federal Reserve will meet to decide on key interest rates in the U.S.
economy. The Fed is expected to leave rates unchanged.

Since the beginning of this year, the U.S. Federal Reserve has
been broadcasting that key interest rates have peaked and are trending
downwards. However, the tone of the accompanying rhetoric has changed in favour
of tighter monetary policy. The reason for this is inflation, which has no plans to
decline. Besides, we also see a slowdown in the U.S. economic growth.

On 25
April, the U.S. Bureau of Economic Analysis (BEA) reported on GDP dynamics
(Advance Estimate)—GDP growth slowed to a 1.6% rate in the first quarter, well
below expectations. The next day, the BEA released the PCE index—a measure of
inflation closely monitored by the Federal Reserve. It showed that the prices
rose by 0.3% from February to March, the same as in the previous month. The
index rose faster than the Fed’s 2% inflation target in the third straight
month. Thus, the annualised price growth rate was 2.7% in March compared to
2.5% in February.

‘Weak
U.S. economic growth and accelerating inflation are pushing back the likelihood
of a key rate cut in 2024,’ said Kar Yong Ang, Octa Broker financial market
analyst. ‘In fact, the FOMC does not have any positive factors at the moment’,
he added.

The
released GDP and Fed’s preferred inflation data sets a hawkish tone for the
upcoming meeting, which means the USD will likely continue strengthening
against all major currencies. USDJPY may rise above 160.00 by the end of this
week.

About Octa

Octa
is an international broker that has been providing online trading services
worldwide since 2011. It offers commission-free access to financial markets and
various services already utilised by clients from 180 countries with more than
42 million trading accounts. Free educational webinars, articles, and
analytical tools they provide help clients reach their investment goals.

The company is involved in a
comprehensive network of charitable and humanitarian initiatives, including the
improvement of educational infrastructure and short-notice relief projects
supporting local communities.

Octa has also won over 70 awards since
its foundation, including the ‘Best Educational Broker 2023’ award from Global
Forex Awards and the ‘Best Global Broker Asia 2022’ award from International
Business Magazine.

This article was written by FL Contributors at www.forexlive.com.