Without a shadow of a doubt, the main focus of today’s session is the Federal Reserve’s policy rate decision for the month of July alongside the bank’s forward guidance, which will supplement market participants with more information as to what could come next.

Recently, President Trump continued his barrage of attacks, overtly exerting pressure on the head of the central bank, Jerome Powel to slash rates immediately, yet the Chair is not expected to cave in, but rather continue his work unbiased and steadfast.

Forecasts point to the central bank holding the line, keeping the federal funds rate steady at 4.25%-4.5% for the fifth consecutive meeting and abstain for reductions, as more data on the inflationary front is needed before warranting rate cuts. So far, incoming data did not indicate a substantial reignition of price pressures from Trump’s tariff practices, contrary to economists’ views, and has understandably so, fuelled calls for the prolongment of the current policy regime and the wait-and-see approach.

Jobs data has been leaning on the positive side also, with the US labour market force maintaining its resilience amidst a high-interest rate environment, despite insignificant signs of immaterial weakness in the job creation function.

Going beyond today’s (most likely) pause decision, money market expect the Fed to slash rates twice in 2025, once in September and the other in December, amassing a cumulative rate cut total of 50bps and drag borrowing costs to 3.75%-4% at years end.

We have to end by noting however, that this Friday’s NFP print may be play a catalytic role in indirectly nudging the central bank to cut rates sooner and with a higher degree, should the jobs report indicate severe weakness and mass loss of jobs in the month of July.

Technical Analysis

US10Y Chart – The benchmark 10-Year treasury yield in consolidation mode ahead of Fed decision and NFP print

Resistance: 4.50% (R1), 4.65% (R2), 4.80% (R3)
Support: 4.23% (S1), 4.15% (S2), 4% (S3)