What to expect from the FOMC

The US Federal Reserve will announce its latest economic policy decision this Wednesday, in a pretty unusual market environment: wide intraday volatility has been the norm for the last two weeks, as the headlines announcing a Greek deal or a default, keep coming by dozens daily basis. 

The market has temporarily set aside concerns over when the FED will start tightening rates, as investors are pretty much sure the FED will act within this year. Furthermore, both inflation and employment have resulted up beating in their latest readings, with May inflation up-ticking and Nonfarm Payrolls beating expectations by far, as the economy added 280,000 new jobs against expectations of 226,000. 

Nevertheless, generally weaker-than-expected macroeconomic data, had been delaying chances from April to September. So, what should we expect from this June meeting? Indeed, market consensus is that there will no changes in the ongoing policy. Several Central Bank officers had suggested there won't be a rate hike in June, by many are still expecting to raise it sometime this year. 

But along with its policy decision, this month FED's chair Yellen will hold a  press conference, in which the markets will be looking for clues on upcoming moves. Yellen has repeatedly said that the upcoming rate hike is data dependant, which means the statement will be analyzed comma by comma.  

The wording of the statement will be then closely watched, as on its previous statement, the FED has noticed the slowdown in employment attributing it to "transitory factors." Latest employment data however, should see that line off the statement, and any wording regarding a strong recovery in the employment sector will be seen as positive for the dollar.  When it comes to inflation, the FED is well aware that is running well below its target, and is generally dovish over it, so if the organism maintains the same tone, should have a neutral effect over the market. Another sector the Central Bank watches closely, is the housing one that has been giving mixed signals over the last two months, with some outstanding readings being neutralized by quite negative ones. Inflation and employment wording however, will likely lead the way. 

Anyway, it will take a strongly hawkish statement, something pretty unlikely at this point, to see the greenback resuming its bullish trend, or a terrible dovish one, delaying a rate hike to next year, to see the American currency falling apart across the board, also unlikely for this meeting. 

Market's attention continues to be focused on Greece and until the country gets a deal, of finally defaults, the forex board will see choppy trading.  Intraday, a strong dollar will run faster against a weaker EUR, whilst if the market decides to go against the greenback, the GBP and the JPY will likely be the more favored. 

Watch the FOMC Live Coverage with Valeria Bednarik and Yohay Elam