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18.03.2025 09:48 AM
No Major Surprises Expected from the Fed Meeting (Anticipating a Sharp Drop in EUR/USD and Continued Cautious Gold Price Growth)

Markets are experiencing turmoil due to the risk of a U.S. economic recession. Although Treasury Secretary Bessent attempts to reassure investors by calling the market "correction" a healthy process, these concerns remain unresolved.

Since the end of last week, major U.S. stock indices have rebounded slightly, recovering part of the decline that began in late February amid Trump's trade wars with neighboring countries, China, and the EU.

What caused this rebound, and could it turn into a full recovery?

Assessing the economic and geopolitical actions of the U.S. administration and President Trump, it is clear that the course set following the elections is unlikely to change. There are many reasons for this, the most significant being the dire financial situation of the U.S., which can no longer sustain three decades of global hegemony and uncontrolled spending of unbacked funds. Aware of this, Trump and his allies have embraced radical economic protectionism, aiming to transform and restore the national economy within his four-year term. Therefore, the "train" set off in January will not change course. Trump might even allow a mild recession, seeing it as a necessary cleansing of inefficient and unsustainable sectors.

During the 2008–09 financial crisis, President Obama supported all sectors of the U.S. economy, whether profitable or not, by injecting massive amounts of stimulus, effectively showering the economy with "helicopter money." However, such an option is not available today. Investors seem to understand this, exercising extreme caution in their decision-making.

Today marks the start of the Federal Reserve's two-day monetary policy meeting. Will it be a turning point? No. The consensus forecast suggests that all monetary policy parameters, including the key interest rate, will remain unchanged at 4.50%. Will Fed Chair Jerome Powell say anything new? Unlikely. The Fed's hands are tightly tied. On the one hand, inflation has corrected down to 2.8% from 3.0%, but it remains far from the 2% target, and the uncertainty surrounding Trump's economic and geopolitical policies only exacerbates the situation. As a result, the Fed's resolution and Powell's press conference are expected to contain nothing groundbreaking. This means that the current market dynamics are likely to persist.

This suggests continued correction for the U.S. stock market following its recent rebound. According to the ICE Dollar Index, the dollar is expected to consolidate against major currencies in the forex market. Gold has already risen above $3,000 per ounce as a safe-haven asset and may continue its upward movement. Meanwhile, the cryptocurrency market is likely to remain under pressure due to prevailing uncertainty.

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Daily Forecast:

EUR/USD

The currency pair has lost its upward momentum after fully pricing in the military expansion plans of the EU and Germany. Currently, it is overbought and could experience a collapse due to profit-taking or comments from Powell regarding a positive shift in U.S. inflation tomorrow. A drop below 1.0885 could trigger a decline to 1.0840 and then to 1.0780.

GOLD

Gold is trading above the important psychological level of $3,000 per ounce. It may continue to receive support due to geopolitical risks and uncertainties related to the Ukraine crisis. However, a pullback toward $3,000 is possible before a renewed climb to $3,045.

Pati Gani,
Analytical expert of InstaForex
© 2007-2025
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