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Investors to watch dot-plots for fed message

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NEW YORK (Scrap Register): Market watchers expect the Federal Reserve’s so-called dot-plot – which shows the projections of individual policy-makers – to show a distinct move toward a more dovish posture, said analysts.

A two-day meeting winds up on Wednesday. “While it [the Fed] is widely expected to keep rates steady, the accompanying messaging and forecasts will be very important,” said Brown Brothers Harriman.

“The dot-plots are likely to shift significantly downward, with the perhaps signaling either none or one more hike this cycle. In December, it saw two hikes this year and one next year,” BBH added.

Echoed Mark Chandler, chief market strategist with Bannockburn Global Forex, LLC: “No one expects a change in policy. However, everyone is looking for a further shift in the dot-plot.” 

Hussein Sayed, chief market strategist at FXTM, said the Fed meeting is likely to be the most significant risk event for the week. He notes that investors also will be watching to see if there is an announcement to end the central bank’s balance-sheet reduction.

“According to Fed fund futures, markets do not just expect a zero chance of rising interest rates on Wednesday, but are indicating a 26% chance of a rate cut by year-end,” Sayed reported.

“It will be interesting to see if the Fed agrees with current market views. If the dots on the dot-plot are going to be dragged lower, this could attract new selling opportunities for the USD [U.S. dollar], but [Fed Chair Jerome] Powell’s tone and his assessment of the U.S. economy will also drive the currency,” Sayed noted.

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