All eyes on the Fed’s interest rate decision

This week, the market will be closely monitoring the Federal Reserve’s interest rate decision, which is set to be announced on Wednesday. Attention will particularly be on the Fed’s dot plot, which indicates future interest rate projections, to see if the benchmark shifts upward, downward, or it remains unchanged.

Currently positioned at 2, the dot plot is a tool used by the Federal Open Market Committee (FOMC) to express its interest rate outlook. Market participants and economists carefully observe these projections for insights into future interest rate changes.

Therefore, interpreting the lower level cluster implies a need for a reduction in the policy rate, while higher clusters indicate a potential risk of tightening.

Meanwhile, economic sentiment continues to be volatile because of worries about trade and tariffs. This is causing a tough situation with a slowing economy and increasing worries about inflation.

Despite recent economic data indicating that inflation is trending positively, with last month’s Consumer Price Index (CPI) and Producer Price Index (PPI) both falling more than anticipated, the impact of tariffs may not become clear until the latter half of the year.

The true impact of tariffs will only be revealed later in the year, and fears of a recession in the US are escalating.

Gold prices have soared

In the meantime, gold prices have surged, reaching as high as $ 3,005 before easing a bit, due to geopolitical tensions.

Several factors contributed to this increase, as investors flocked to gold as a safe haven amid delays in ceasefire negotiations between Russia and Ukraine.

Additionally, last week, the US stock market experienced significant declines due to recession concerns and economic uncertainty, though it did rebound on Friday.

Gold prices dropped to about $ 2,880 last Monday and have been moving within a range of $ 125 since then, before closing at $ 2,985.

This movement began following the release of weaker US economic data. The uncertainty surrounding tariffs and the lack of progress in negotiations between Russia and Ukraine have pushed prices to record highs.

Furthermore, it seems central bank purchases have prevented any downward correction in gold prices, while some investors have shifted their portfolios from crypto currencies to gold, benefiting the precious metal.

It’s crucial to understand that there are times when both technical and fundamental factors don’t favour gold, yet this doesn’t necessarily reflect in its price.

Inflationary US economic data often creates opportunities for buying on dips, while weaker reports tend to bolster the commodity.

Ultimately, it’s the flow of news and information that significantly influences gold prices. This suggests that any positive geopolitical news could prompt a correction in gold prices, potentially causing a sharp decline.

The prevailing uncertainty is likely to persist, as there are no signs of easing tensions.

With gold nearing the upper limit of its range and the end of the quarter approaching, instead of correcting gold prices could still rise in response to negative news, though there is also considerable potential for them to drop in light of negotiation developments. Volatility in the financial markets is expected to continue until conditions improve.

This is a busy week for global finance, with the market eyeing updates related to tariffs.

Bank of Japan will announce its interest rate decision, while the Federal Reserve will unveil its policy on Wednesday, and the Swiss National Bank and Bank of England are set to release their interest rate decisions on Thursday.

Various key US economic indicators will also keep the market alert, including Retail Sales, the Empire State Manufacturing Index, Housing Starts and Building Permits, weekly jobless claims, Existing Home Sales, and the Philly Fed Manufacturing Survey.

Overall, market activity is expected to remain erratic and volatile.

#GOLD @ $ 2984.40- Gold may reach new heights if it surpasses the resistance at $ 3004, possibly targeting $ 3018 or $ 3065. However, if it fails to break through the resistance, it could drop to $ 2965 or $ 2938.

#EURO @ 1.0875- At first, support near 1.0780 may remain intact. However, there is a strong resistance level around 1.1010 that could prevent a rise to 1.1060. If the support level breaks to the downside, it could lead to a drop toward 1.0720-40 zones.

#GBP @ 1.2935- Pound Sterling has solid support at 1.2830. To move higher, it must surpass 1.3030 to reach 1.3095. A breakdown below the support level could lead to a decline to 1.2770.

#JPY @ 148.62- Expected to remain above 147.50 to test and surpass 150.80, aiming for 151.80. However, if support gives way, the next major support level is 146.05.

Copyright Business Recorder, 2025