Without a shadow of a doubt, the theme with the outmost importance for the day is the Federal Reserve’s final interest rate decision for 2025 and the ancillary data that comes alongside it.

Money markets have grown increasingly confident that the central bank will have no other choice but to slash its key policy rate by 25bps and bring the federal funds rate down to 3.5%-3.75% range, assigning over 90% probability in the aforementioned scenario. The remainder of the polled economists’ side with the scenario where the central bank stands still, waiting for more clues.

Stated reasons why the majority believes that the Fed will cut rates later today, include the absence of reignition of inflationary pressures from Trump’s tariffs but more importantly, the rapid cooling of the labour market in recent months. Given the absence of official employment data from the BLS, after the longest US government shutdown period created a data-void, forecasters turned their attention to the only available data floating the market and that was the private payrolls data from ADP, feeding their models with this data. And ADP data showed cracks.

Beyond the decision however, market participants’ attention will fall upon, policymakers’ views about what lies ahead and where they do see interest rates moving towards to in 2026. The renewed dot plot graph will highlight just that. Money markets see another 2 rate reductions for a cumulative total of 50bps. Inflation and growth projections from the Fed will also fall under economists’ microscopes, providing a valuable comparison with their own forecasting models.

Lastly, we must note that Fed Chair Powell’s speech post the decision runs the risk of spurring up volatility across all asset classes. Markets expect to hear hawkish remarks from the head of the central bank after the rate reduction, reiterating the narrative for data dependency and communicating once again the institution’s unyielding stance against external political pressures.

The greenback and equity futures stand muted in the premarket session ahead of the decision, alongside gold, whereas strong momentum has pushed silver futures into another record high, primarily on supply tightness rather than the expectations for looser policy conditions.

Technical Analysis

DXY Chart – The Dollar index holds its ground around the 99 area ahead of Fed’s rate decision

Resistance: 100 (R1), 101.20 (R2), 102.40 (R3)
Support: 98.20 (S1), 97.20 (S2), 96.00 (S3)