The Fed kept all monetary policy settings unchanged, as expected. However, Fed Chair Kevin Warsh indicated that the central bank was concerned about rising inflation, leaving a high probability of an interest rate hike in December.

Today, Thursday, the day after the US central bank's two-day meeting, the markets are showing a fairly clear pattern. On the one hand, this is supporting the US dollar, while on the other, it is putting temporary pressure on futures contracts for the three major US stock indices. Gold and silver prices have also weakened. Overall, the forecasts made ahead of the meeting have largely been confirmed. First, interest rates were left unchanged. Second, Kevin Warsh's press conference contained no strong statements about the monetary policy outlook and was not dovish.

The political factor appears to have been the main reason for this outcome, with elections to the House of Representatives and the Senate scheduled to begin on November 3. As Donald Trump's representative, Warsh seemingly wanted to avoid rocking the boat with any monetary policy changes ahead of this crucial vote for Republicans in the legislative elections.

Against this backdrop, the US dollar's decline yesterday was limited, and it resumed its upward movement today. US stock indices also attempted to recover yesterday. Gold prices initially edged higher, but those gains subsequently faded as markets shifted their focus from the Fed's meeting outcome to incoming economic data.

Important Personal Consumption Expenditures (PCE) price index figures will be released today. Both the headline and core readings are expected to rise. This means the Fed could raise interest rates at its December meeting, with the probability of such a move currently very high. According to federal funds futures, the likelihood of a rate hike is currently estimated at nearly 80%.

What can be expected in the markets today?

If the PCE report comes in at or above expectations, the US dollar is likely to receive significant support in the Forex market.

Daily Forecast

EUR/USD

The pair is trading above the 1.1115 support level. A break below this level could lead to a decline toward 1.0972. The 1.1098 level could serve as an entry point for a short position. A stop-loss could be placed at 1.1178.

USD/CAD

The pair is trading above the 1.3970 support level. A break below this level could lead to a decline toward 1.3907. The 1.3965 level could serve as an entry point for a short position. A stop-loss could be placed at 1.4007.