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The big Fed event is coming this week, with high expectations of  the FOMC holding interest rates!

How likely is this the case and is there still expectations of higher interest rates ahead?

Here are major points you need to know if you’re planning on trading the event:

Event in Focus:

Federal Open Market Committee (FOMC) Monetary Policy Statement

When Will it Be Released:

September 20, 2023, Wednesday: 6:00 pm GMT

Fed Chairman Powell will conduct a presser 30 minutes later.

Use our Forex Market Hours tool to convert GMT to your local time zone.


  • Fed is expected to hold the Fed Funds target range at 5.25% – 5.50% range (CME Fed Watch tool sees 99.0% probability as of Sept. 18)

Relevant U.S. Data Since Last FOMC Statement:

🟢 Arguments for Tighter Monetary Policy / Bullish USD

U.S. CPI for August: 0.6% m/m (0.5% m/m forecast; 0.2% m/m previous); Core CPI: 0.3% m/m (0.2% m/m forecast/previous); for July: 0.2% m/m as forecasted

U.S. Import Prices for August: 0.5% m/m vs. 0.1% m/m previous; Export prices rose 1.3% m/m vs. 0.5% m/m previous

U.S. Producer Prices Index for August: 0.7% m/m (0.4% m/m forecast/previous); core PPI at 0.2% m/m as expected (0.4% m/m previous); for July: 0.3% m/m (0.2% m/m forecast; 0.0% m/m previous)

U.S. Core PCE Price Index for July: 0.2% as expected; Inflation-adjusted consumer spending rose by 0.6% m/m

U.S. unit labor costs in the nonfarm business sector increased 2.2% in Q2 2023, reflecting a 5.7% increase in hourly compensation and a 3.5% increase in productivity.

ISM Manufacturing Prices Index increased from 42.6 to 48.4 in August

ISM U.S. Services PMI for August: 54.5 (52.5 forecast; 52.7 previous); Employment Index jumps from 50.7 to 54.7; Prices Index rose from 56.8 to 58.9

U.S. Retail Sales for July 2023: 0.7% m/m (0.3% m/m forecast/previous); Core Retail Sales was up 1.0% m/m (0.3% m/m forecast; 0.2% m/m previous)

🔴 Arguments for Looser Monetary Policy / Bearish USD

U.S. Non-Farm Payrolls for August: 187K (180K forecast) and the July read revised lower to 157K from 209K; unemployment rate ticked higher to 3.8% from 3.5% unexpectedly; average hourly earnings grew by +0.2% m/m (+0.4% m/m forecast/previous)

The second estimate for U.S. GDP Growth for Q2 2023 came in lower at 2.1% y/y vs. 2.2% forecast; quarterly core PCE Prices Index change at 3.7% (3.8% forecast, 4.9% previous)

U.S. Personal income in July ticked lower to 0.2% from 0.3% previous

Job Openings and Labor Turnover Survey showed open job openings decreased from 9.17M in June to 8.83M in July

Previous Releases and Risk Environment Influence on USD

July 26, 2023

Overlay of USD vs. Major Currencies Chart by TV

Overlay of USD vs. Major Currencies Chart by TradingView

Action/results: The FOMC hiked interest rates by 0.25% from 5.25% to 5.50%, as well as kept the door open for future rate hikes as Powell said they’ll go on a meeting-by-meeting basis.

This statement was pretty much inline with expectations and with the previous statement rhetoric, including comments that the path to the inflation target still has “a long way to go” as inflation remains stronger than expected.

USD sold off ahead of the statement and kept the trend lower after the event into the Thursday session before stabilizing ahead of fresh U.S. data, which became the focus for the Greenback after a very strong U.S. advanced GDP report update.

Risk Environment and Intermarket Behaviors: This was an incredibly busy week with monetary policy statements from the Federal Reserve, European Central Bank, & the Bank of Japan. Hard and soft economic updates also filled the calendar, and the People’s Bank of China took surprise action by intervening in the FX market to strengthen the yuan.

Overall, broad risk sentiment arguably leaned net positive, a signal that traders mainly focused on China’s promise of more stimulative efforts, net positive U.S. economic updates (rising “soft landing” narrative), and signs that the global interest rate hiking regime may be nearing its end.

June 14, 2023

Overlay of USD vs. Major Currencies Chart by TV

Overlay of USD vs. Major Currencies Chart by TradingView

Action/results: For the first time since March 2022, the Fed did not raise its interest rates and kept its Federal Funds rate steady at the 5.00% – 5.25% range.

USD gained ground at the release, partly because the move was widely communicated ahead of the event. Not only that, but the dot plot projections that came with the statement showed that members are expecting at least two more rate hikes in 2023 and that not one is expecting a cut throughout the year.

The “hawkish pause” bumped USD higher in the first 15 minutes of the release. A bit of profit-taking dragged it to at least 50% pullbacks before ending the day near its intraday highs.

Risk Environment and Intermarket Behaviors: The combo of weak global demand concerns and expectations of looser monetary policies kept the major currency pairs in tight(ish) ranges early in the week.

It wasn’t until China dumped a bunch of top-tier reports and the U.K. printed its labour data when traders made more decisive moves that contributed to increased volatility later that week.

Price action probabilities

Risk sentiment probabilities: Similar to the July Event, the calendar for this trading week is action packed with Central Bank Decisions, CPI Releases, and Global PMI Updates.

Risk sentiment will likely be dictated by those factors, as well as if China takes further stimulative action early Wednesday by adjusting their Prime Loan rates.

If we see a scenario where China lowers their prime loans rates (action inline with recent stimulative actions) and we get rhetoric from central banks that we are very close to the end of rate hikes, risk sentiment is likely to lean positive through Friday.

Flash global PMIs on Friday could change the tone ahead of the weekend if they are inline with current trend of negative vibes from global business. But this data has been mixed with Europe showing more weakness than North America in recent months, so it’s likely wise to wait for the data and reaction before making end of week moves, or reduce risk / take profits before the releases.

U.S. Dollar scenarios

Base case:

Based on recent data and market expectations, the Fed is likely to hold the 5.25% – 5.50% Fed funds range, but may raise concerns with recent sticky inflation data and note the overall resiliency of the U.S. economy shown by GDP & employment data. This all supports the “higher for longer” argument.

Of course, traders will have to pay attention to more than the points above, including potential changes to rhetoric on inflation and growth outlook, how long rates will stay high and if rate cut expectations will be pushed out further.

But the main focus of the event is likely the question of whether or not the Fed will hike one more time in 2023 if they don’t hike this week.

So, there’s actually a lot of uncertainty still on the USD reaction outcome from this event, especially considering that the U.S. dollar has been on a ride higher in September, which raises the odds of a “buy-the-rumor, sell-the-news” reaction on the event if the expected scenario plays out.

With all that said, out of dozens of ways this can all play out, the most probable scenario is that the Fed holds, signals another rate hike in 2023, and rate cut expectations may be pushed further out. Again, given the rally in the Greenback in September, this may not necessarily spark an initial dollar rally unless we see pressure on USD ahead of the event.

Overall, it’s likely best to wait for the event to play out before considering moves on the U.S. dollar. If mostly inline with expectations, as with the previous Fed releases, the directional reaction and focus may be limited anyways as traders may quickly move on to the remaining central bank events for the rest of the week and flash PMI data.

Alternative Scenario: The recent rise in the prices data raise the probability of a rate hike scenario outcome to 1.0% as shown by the latest CME Fed Watch tool. So it’s a very low probability scenario, but this is the real opportunity of the event to watch out for if it does happen.

Essentially this scenario would likely surprise the market, which would quickly drive up broad volatility, along with concerns for the economic stability, especially in the banking and property sectors, as well as government debt servicing concerns.

This scenario potentially has risk-off behavior reactions, which could drive some traders to the Greenback, especially against currencies and assets that tend to fall in risk aversion environments like the Aussie & New Zealand dollars, equities, and crypto. Gold may even see pressure as rising bond yields may draw some capital away from the precious metal.

No matter which scenario plays out, be sure to practice strong risk management, especially in situations where the outcome is highly uncertain and potentially highly volatile as with this week’s FOMC event.

This content is strictly for informational purposes only and does not constitute as investment advice. Trading any financial market involves risk. Please read our Risk Disclosure to make sure you understand the risks involved.