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17.08.202613:59 Forex Analysis & Reviews: Markets Expect the Fed to Keep Interest Rates Unchanged

Relevancia 07:00 2026-08-19 UTC--4

It appears that by Monday, market participants had realized that the Federal Reserve will not follow their expectations and will not raise interest rates at its September meeting. This is clearly reflected in the weakening US dollar and the decline in the yields on 2-year Treasury notes, which are highly sensitive to potential changes in monetary policy.

It appears that by Monday, market participants had realized that the Federal Reserve will not follow their expectations and will not raise interest rates at its September meeting. This is clearly reflected in the weakening US dollar and the decline in the yields on 2-year Treasury notes, which are highly sensitive to potential changes in monetary policy.

So, what happened?

In fact, it can be said that the market's focus has begun to shift from firm expectations of a rate hike next month toward a pause. Market participants are beginning to realize that the central bank will stick to its chosen approach, namely, responding to incoming economic data rather than pressure from its officials. The economic data themselves indicate that inflation is easing amid stabilizing oil and energy prices, while the labor market remains extremely weak. The July report from the Department of Labor showed not merely some increase in the number of jobs, but an actual decline. In such a situation, following the market's expectations would be the wrong decision.

Is this a genuine change in sentiment?

Yes. While it is still difficult to say that the direction of market expectations has definitively changed, the US dollar could continue to weaken in the short term, accompanied by increased demand for US equities. This situation could also support demand in the cryptocurrency market due to the weaker dollar. This trend is likely to persist until the release of the minutes of the Federal Reserve's latest meeting this Wednesday and afterward, as the minutes are unlikely to show any major changes in the outlook for a shift in monetary policy. The speech by K. Warsh in Jackson Hole, as well as the release of new Personal Consumption Expenditures (PCE) Price Index data, could provide a decisive signal on this issue. As an inflation indicator, the PCE Price Index could confirm the gradual slowdown in US inflation.

What can we expect in the markets today?

I believe that after the dollar's short-term weakening, followed by a corrective recovery, we should expect its decline to resume in the Forex market.

Daily Forecast

Exchange Rates 17.08.2026 analysis

Exchange Rates 17.08.2026 analysis

#USDX

The index is correcting higher toward the resistance level at 99.50. It is highly likely to rebound from this level and reverse lower, falling toward 98.95. The 99.43 level could serve as an entry point for a short position. The stop-loss could be placed at 99.85.

EUR/USD

The pair is trading above 1.1575. It could rise toward 1.1683. The 1.1595 level could serve as a buying opportunity on a downward pullback. The stop-loss could be placed at 1.1544.

*El análisis de mercado publicado aquí tiene la finalidad de incrementar su conocimiento, más no darle instrucciones para realizar una operación.

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