Dow Jones Forecast: DJIA slips ahead of the Fed rate decision

US futures

Dow futures -0.13% at 39054

S&P futures -0.10% at 5175

Nasdaq futures 0.14% at 18047

In Europe

FTSE -0.14% at 7725

Dax 0.19% at 18025

• The Fed is expected to leave rates unchanged
• Could the Fed be more hawkish after the hot inflation data?
• Tesla rises on China price increase
• Oil eases ahead of the rate decision

Caution ahead of the FOMC rate decision

U.S. stocks are set to open modestly mixed, after gains yesterday and amid signs of nerves ahead of the FOMC rate decision.

At 1800 GMT, the Federal Reserve will announce its interest rate decision for March, for policymakers are widely expected to leave rates unchanged at 5.25% to 5.5%. 

However, after two consecutive months of higher-than-expected inflation and amid ongoing resilience in the US economy, there is a possibility that the Fed could adopt a more hawkish tone, pushing back on early rate cut expectations.

The Fed will also release its fresh projections where eyes will be on the dot plot, which lays out the policymakers' expected path for interest rates over the coming 12 months. The dot plot could be downgraded from three rate cuts signaled in December to two.

Heading into the meeting, the CME Fed watch tool shows the market pricing in a 60% probability of the first Fed rate cut coming in June. A more hawkish-sounding Powell could reduce this probability and push back the first rate hike to July.

Should the Fed dampen rate cut expectations, US equities could fall lower, given that recent all-time highs were reached on expectations that the Fed would start cutting interest rates sooner rather than later.

Corporate news

General Mills is rising 3% ahead of the open after posting a smaller-than-expected fall in quarterly sales, as higher prices helped offset slowing demand.

Tesla is rising pre-market after confirming that it will raise the price of China produced Model Y vehicles from April 1 suggesting that demand could be rising in the key market.

Intel is rising 3% after the Biden administration announced it will award the chip maker $20 billion in grants and loans as the US looks to boost the country’s chip sector.

Dow Jones forecast – technical analysis.

The Dow Jones continues to trade in a holding pattern, capped on the upside by 39,240, the all-time high reached in late February, and by 38450 on the lower side, the March low. Sellers will look to break below 38450 to test 38,000 the February low. Buyers will look to rise above 39240 to fresh all-time highs towards 40,000.

FX markets – USD rises, GBP/USD falls

The U.S. dollar is rising higher for a fifth straight session in anticipation of a more hawkish tilt from the Federal Reserve after its interest rate decision later today.

EUR/USD is falling amid a stronger U.S. dollar and after ECB president Christine Lagarde again signaled to a June rate cut, although she said that what comes after that is less certain. Looking ahead eurozone consumer confidence data is due later today modestly two -15 in March up from -50.5.

GBP USD is falling after UK inflation data cooled more than expected to 3.4% in February, down from 4% in the previous month. The data supports the view that the BoE is on track to cut interest rates this year. The BoE rate decision is tomorrow, and policymakers are expected to leave rates on hold at 5.25%.

Oil eases ahead of the Fed

Oil prices are slipping lower on Wednesday from a four-month high in cautious trade ahead of the Fed rate decision.

Both benchmarks settled on Tuesday at their highest level since October amid ongoing signs of tight supply. However, the stronger dollar had limited the upside, making oil more expensive for those buying with foreign currency.

Yesterday, the API showed that US crude inventories fell by 1.5 million barrels in the week to March 22, defying expectations of a small build.

Attention will be on EIA US inventory data later today where a second straight week of draws could point to improving demand ahead of the US driving season.