The exchange rates of currencies, gold and cryptocurrencies may tremble tonight

The Federal Reserve will announce today decisions on an interest rate hike and an end to asset purchases. This can affect the dollar, gold, stock indices or even cryptocurrency.

Looking at the federal funds rate futures market they are quoting on CME, the probability of changes in interest rates is negligible today and amounts to only a few percent.

First rate hike in March. What about the next ones?

In turn, no change in interest rates is estimated with a probability of 94,4%. Therefore, the key decision seems to be how quickly the asset purchase program will be curtailed and how the Fed views possible further increases in 2022.

The probability of the first increase in March is 93 percent, of which 88 percent. is a chance for a rise by 25 basis points, and 5 percent. is the probability of a 50 point increase. It is here that the key game may take place in the near future. What will be the scale of the March rate hike - such hints may be sought by investors today.

Fed on a mission to tone down sentiment

The Fed will announce its decision today in an atmosphere of increased risk. By looking at VIX index, i.e. fear index as measured by the monthly volatility from options to S&P 500 index, we can see that it is at 30 points. This is a relatively high level, last observed in February 2021.

It seems that the main task of the Fed in recent times has been to calm the markets, not to introduce even bigger surprises. Therefore, the hawkish stance of the Federal Reserve may be unjustified today, instead it could appear more dovish tones.

The decision of the Federal Reserve will be announced today at 20, half an hour later, the press conference of its boss Jerome Powell begins.