Federal Reserve Takes Centre Stage as Markets Await Fresh Rate Signals.

USD – The Federal Reserve takes centre stage today, with rates widely expected to remain unchanged. Markets will focus on updated economic projections and the Fed’s tone under Kevin Warsh, while easing oil prices and resilient inflation continue to shape expectations.

EUR – Remains largely at the mercy of the dollar, with today’s Federal Reserve decision expected to be the primary driver. Limited domestic catalysts leave the euro vulnerable to shifts in US monetary policy expectations.

GBP – Has come under pressure following a softer-than-expected inflation reading, reinforcing expectations that the Bank of England can afford to keep rates on hold. Attention now turns to tomorrow’s labour market data and BoE decision.

USD:

The Federal Reserve is firmly in focus today, with markets fully pricing in no change to interest rates. Attention will instead be on the Fed’s updated economic projections, the dot plot, and the tone struck by new Chair Kevin Warsh as investors assess whether policymakers are leaning towards higher rates despite political pressure from President Trump for lower borrowing costs.

A backdrop of inflation above 4% and falling oil prices following recent geopolitical developments creates an interesting policy mix. Alongside the Fed decision, today’s US retail sales data will provide another key insight into the strength of the American consumer and the broader economy.

EUR:

The euro is likely to take its direction almost entirely from today’s Federal Reserve decision, with only a handful of domestic releases, including the final CPI print and comments from ECB officials, on the calendar.

Against sterling, the euro has strengthened over recent sessions and attention will quickly shift to tomorrow’s Bank of England decision. Elsewhere in Europe, markets will also monitor rate decisions from the Riksbank today, followed by the Norges Bank and the Swiss National Bank tomorrow.

GBP:

Sterling is under pressure this morning after UK inflation came in below expectations at 2.8%, versus forecasts of 3.0%. The softer reading, helped by subdued food inflation, supports the view that the Bank of England can comfortably leave rates unchanged over the coming meetings.

Markets will now turn their attention to tomorrow’s UK labour market report, the Makerfield by-election and the Bank of England’s policy decision. While expectations remain for at least one rate increase in 2026, today’s inflation data has reduced the urgency for any near-term policy tightening.

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