Never miss a story from Rich Dvorak

Subscribe to receive daily updates on publications
Please enter valid First Name
Please fill out this field.
Please enter valid Last Name
Please fill out this field.
Please enter valid email
Please fill out this field.
Please select a country

I’d like to receive information from DailyFX and IG about trading opportunities and their products and services via email.

Please fill out this field.

Your Forecast Is Headed to Your Inbox

But don't just read our analysis - put it to the rest. Your forecast comes with a free demo account from our provider, IG, so you can try out trading with zero risk.

Your demo is preloaded with £10,000 virtual funds, which you can use to trade over 10,000 live global markets.

We'll email you login details shortly.

Learn More about Your Demo

You are subscribed to Rich Dvorak

You can manage your subscriptions by following the link in the footer of each email you will receive

An error occurred submitting your form.
Please try again later.


The Fed is set to take the spotlight tomorrow with the FOMC expected to announce its latest interest rate decision at 18:00 GMT. While it’s largely expected that the US central bank will keep its target policy rate range unchanged at 2.25-2.50 percent, USD currency traders will likely focus their attention on Chair Jerome Powell’s follow-up commentary.


Currency Volatility: Fed Impact on USD Looks Underpriced by Options MarketCurrency Volatility: Fed Impact on USD Looks Underpriced by Options Market

Although overnight implied volatility has ticked higher across major USD currency pairs as option traders prepare for tomorrow’s Fed announcement, anticipation of significant price swings remain particularly low. Yet, that in turn may set the stage for significant volatility should any unexpected updates be made. This may be the case in particular if the Fed disappoints markets with a position that’s less dovish than what many market participants have hoped for. If the Fed does come out less dovish than anticipated, the greenback could very well jump higher and recover ground from its recent selloff – particularly against the Euro.

Check out these possible US Dollar Price Action Setups ahead of tomorrow’s FOMC meeting.


Currency Volatility: Fed Impact on USD Looks Underpriced by Options Market

Visit the DailyFX Economic Calendar for a comprehensive list of upcoming economic events and data releases affecting the global markets.

Meanwhile, the Pound Sterling should remain on every currency trader’s radar despite the fall in GBPUSD implied volatility. Headlines with the latest Brexit developments could send spot markets gyrating as great uncertainty surrounding the UK’s departure from the European Union remains. Additionally, pressure in inflation statistics could add fuel to the fire that may force the Bank of England to consider raising interest rates – especially with other economic indicators surprising to the upside.

NZDUSD may experience larger than expected price swings in particular as it faces confluence of a Fed policy update followed shortly by New Zealand GDP data. If NZ economic growth comes in materially above or below consensus, NZDUSD could be prompted to break free from its tight trading range. According to real-time IG client positioning data, NZDUSD trader sentiment shows a bearish bias headed into tomorrow’s session. Specifically, the data shows that 42.8 percent of traders are net-long with the ratio of traders short to long at -1.33 to 1.


Currency Volatility: Fed Impact on USD Looks Underpriced by Options Market

Check out IG’s Client Sentiment here for more detail on the bullish and bearish biases of EURUSD, GBPUSD, USDJPY, Gold, Bitcoin and S&P500.

-Written by Rich Dvorak, Junior Analyst for DailyFX

-Follow @RichDvorakFX on Twitter