The FOMC rate decision is the main event on Wednesday, with markets also set to watch the US retail sales report and the Fed’s updated projections.
Earlier in the day, the UK CPI report led the European session. The data came in below expectations. As a result, it supported the Bank of England’s patient stance. It may also lead traders to scale back bets on further BoE rate hikes, especially after the drop in oil prices.
Looking ahead in Europe, the final Eurozone CPI report is the only major item on the calendar. However, the source said the release is unlikely to change anything for the ECB. Therefore, any market reaction may stay limited.
FOMC Rate Decision and Retail Sales
In the US session, traders will first look at retail sales. The headline monthly reading is expected at 0.5%, unchanged from the prior 0.5%. Meanwhile, retail sales excluding autos are seen at 0.5%, compared with 0.7% previously. The control group is expected at 0.4%, down from the prior 0.5%.
The source described retail sales as a market-moving release. However, it also said traders often fade the move because the data can be volatile.
FOMC Rate Decision in Focus
The FOMC rate decision remains the key event of the day. The Fed is widely expected to leave the federal funds rate unchanged at 3.50% to 3.75%. In addition, the statement is expected to drop its easing bias. No dissenter is expected at this meeting.
Markets will also get the Summary of Economic Projections. The source said near-term inflation is expected to be revised higher, while unemployment is seen lower. Moreover, the dot plot is expected to show no cuts this year. The main focus will be the dot plot and Fed Chair Warsh’s press conference.
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