Markets pause ahead of Fed rate decision and dot plot projections

Global financial markets entered a holding pattern Monday as traders await the Federal Reserve's interest rate decision and updated economic projections scheduled for Wednesday afternoon. Currency markets showed mixed movements with the dollar index trading flat near 100.50 as investors weighed conflicting economic signals. Recent US data presented a mixed picture: retail sales and import prices exceeded expectations, suggesting economic resilience, while labor market indicators continue showing weakness. Markets have fully priced in a 25 basis point rate cut, marking the Fed's first easing since December. The focus extends beyond the immediate decision to the Fed's dot plot projections for 2025-2026, which could significantly impact dollar positioning. Major forex pairs traded in tight ranges, with EUR/USD hovering near 1.1050 and GBP/USD at 1.3150. Implied volatility measures suggest traders expect significant moves post-announcement, particularly in USD crosses.