The big day has finally arrived as the much-anticipated Federal Funds Rate is due to be released from the US. To date markets have priced in, for the most part, at least 3 interest rate hikes this year out of the USA which has seen the USD strengthening across the board as traders jump from other currencies to the USD in hopes of reaping the reward of a higher interest rate. The rate hike for today’s meeting is expected to take the Federal Funds Rate to <1% from the current <0.75%. If the Fed does not raise rates as expected the USD will be pounded as disappointed bulls run for the hills while if the rate hike is larger than expected, the USD will be aggressively bought as markets adjust their positions to price in the more aggressive FED. However, it is likely that we will see the expected 0.25% increase which will then put all eyes on the FOMC Economic Projections, Statement and Press conference.

Should the projections and statements be of a bullish nature, in which a clear timeline is given for further tightening, the USD will respond favorably as trader’s price in the hawkishness, however, if the projections and statements are more pessimistic than expected or put doubt on the likely hood of a second or third rate hike, the USD will be unwound aggressively as traders back track their recent aggressiveness to account for a more dovish outlook of the US economy.

Leading up to the event, there is a host of data which will also play a large role in today’s action given that the FOMC was clear to adopt a data dependent view before acting on increasing rates, specifically regarding employment and inflation. Therefore, if today’s CPI and Retail Sales data outperforms, we should see some bullishness enter the market as traders prepare for a more hawkish statement while worse than expected prints will dampen sentiment, driving the USD lower as market prepare for a more dovish statement and projection.

The Asian session also holds some fireworks as we see the release of employment data out of Australia which if they beat expectation will result in a strengthening AUD while a miss on expectations will see the AUD weaken.

Finally, we see the Bank of Japan meeting outcomes in which they too will release their Policy Rate, Monetary Policy Statement and Press conference. A more hawkish BOJ will see the JPY strengthen across the board while a more dovish BOJ will see the JPY weaken aggressively.