FOMC Preview

The Fed convenes for the first time since Jerome Powell announced the shift to AIT. No adjustment to policy is expected but the dot plot could be lower notably lower.



Wednesday 16th September (6pm GMT)

What to expect
The Federal Reserve Open Market Committee convenes this week for the first time since Fed Chair Jerome Powell announced that the central bank would shift towards average inflation targeting (AIT).

The central bank is not expected to adjust policy, despite Congress’ failure to agree to additional fiscal stimulus. Instead further clarification surrounding AIT and updated economic forecasts could drive both the dollar and the outlook for S&P500.

The Summary of Economic Projections (SEP) will be in focus, with inflation and growth forecasts set to dominate as well as the dot plot and what the new Average Inflation Target policy means there.

At the Jackson Hole symposium, Fed Chair Jerome Powell announced a shift in policy framework to allow for inflation to overshoot the 2% target for extended periods of time, to make up for the long periods of time that it has been under the 2% target. Investors will be looking for further clues on the targeting method and more broadly speaking clarification surrounding the method. 

The change in policy targeting is likely to reflected in the Fed’s dot plot, release in the SEPs. The dot plot could show a notable lowering of interest rate expectations over the longer term. Previously the Fed Funds had seen interest rates normalising after 2022.

Lower interest rate expectations could dampen demand for the US Dollar whilst boosting the outlook for riskier assets such as stocks, potentially pushing the S&P500 and the tech heavy Nasdaq back to recently achieved highs.

Comments to this end from the Fed could calm investors’ concerns over the lack of stimulus from Congress at least for the near term.

US Dollar Index
After dropping steeply over the past 4 months, US Dollar Index was showing some signs of rebounding in September, advancing 0.66% last week. This week, DXY is back trading on the back foot, shedding -0.3% and breaking through key support at 93.50, to strike a low of 92.88 on Monday.

The 4 hour chart shows the steep sell off coming into August. However, last month was more abut consolidation, only edging marginally lower compared to previous months.
With the price heading southwards, a breakthrough 92.70 could be considered a bearish signal opening the door to 91.75.
On the flip side a break above 93.65 is needed to negate the current bearish trend.

More from DXY


This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

GAIN Capital Singapore Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the GAIN Capital group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), GAIN Capital Singapore Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact GAIN Capital Singapore Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither GAIN Capital Singapore Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

GAIN Capital Singapore Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit for the complete Risk Disclosure Statement.

Important Notice:

Cryptocurrencies are not legal tender currency and trading of derivatives on Cryptocurrencies are currently not covered under any regulatory regime in Singapore. Consequently, investors should be aware they do not have protection under the Securities and Futures Act (Cap. 289). Please ensure that you are fully aware of the risks.