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19.03.2025 09:27 AM
How Might Markets React After the Fed Meeting? (Expecting a Sharp Decline in GBP/USD and a Drop in #SPX)

Today, the market will focus on the Federal Reserve's final decision on monetary policy. It is expected to bring nothing new, so the main topic will remain the same as in recent months—the impact of Trump's policies on the U.S. economy.

While the situation with interest rates in the U.S. seems relatively straightforward, investors will be interested in the Fed's quarterly projections on interest rates, GDP, unemployment, and inflation. Based on the latest data, the Fed may raise its 2025 inflation forecast, which was previously set at 2.5% in December last year. The plan for two interest rate cuts this year is also expected to remain in place. However, it should be noted that the Fed, including its members and Chairman Jerome Powell, has consistently advocated a patient approach for several months—in other words, simply observing how events unfold.

As expected, the two-day rebound in U.S. stock markets has ended, and yesterday's decline in major stock indices has yet to be reversed. Investors are waiting for the Fed's forecasts, which could have a short-term impact on market sentiment. However, judging by the continued rise in gold prices—as a safe-haven asset—the Fed's expectations for key macroeconomic indicators such as GDP, inflation, employment, and interest rates are unlikely to differ significantly from previous ones.

How Might Markets React to the Fed's Monetary Policy Decision?

I believe the reaction will not be particularly optimistic. I stand by my position based on yesterday's forecast. The U.S. stock market, which remains under significant pressure from the risk of an economic recession, will, at best, consolidate near current levels in key indices.

U.S. Dollar:

The dollar previously benefited significantly from rising inflation in the U.S. and the slowdown of the rate-cutting cycle. However, as soon as recession risks appeared on the horizon—exacerbated by uncertainty surrounding the outcome of the trade war—it came under strong pressure. It will likely remain above the 103.00 mark on the ICE index, but expecting much more upside is probably unrealistic.

Cryptocurrency Market:

A similar situation will likely be observed in the crypto market. One key reason is the ongoing uncertainty regarding the future of the U.S. economy. On the other hand, Donald Trump's clear intention to strengthen the dollar's position globally will negatively affect demand for tokens. His statements in support of cryptocurrencies remain vague at best. I still believe that economic policy will pressure interest in tokens, leading to a significant decline in their value over time.

Gold:

Gold's price has already nearly reached the target level of 3045.00. I believe that worsening market sentiment and the Middle East and Ukraine crises will continue to support demand for this safe-haven asset for some time.

Daily Forecast:

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GBP/USD

The pair has risen significantly recently due to intense pressure on the dollar. However, it is losing momentum for further growth due to a lack of new supportive factors. From a technical standpoint, there is a divergence between the price chart and the RSI and MACD indicators. A drop below 1.2940 could lead to a significant decline to the 1.2850 level.

#SPX

The CFD contract for the S&P 500 futures is above 5600.00. If Powell's speech following the Fed meeting does not contain any market-supporting signals, the futures contract could decline further, reaching its first target level at 5521.00 and then the second at 5452.50.

Pati Gani,
Analytical expert of InstaForex
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