Markets are anxiously awaiting the outcome of the Federal Reserve's monetary policy meeting, as its decision could have a significant impact on investor sentiment and asset prices.Until recently, there was considerable debate among market experts over whether the Federal Reserve would leave interest rates unchanged or opt for another rate hike. Federal funds futures currently indicate the following market expectations: the probability of a 25-basis-point rate increase stands at 29.4%, while the likelihood of rates remaining unchanged is estimated at 70.6%. It is worth noting that, historically, by the day the Federal Reserve concludes its policy meeting, market participants have typically priced in the outcome with near certainty.Nevertheless, there remains a risk of a surprise. Under the Fed's new leadership, interest rates could still be raised. At the June meeting, several members of the Federal Open Market Committee (FOMC) argued in favor of another rate increase, citing persistently elevated inflation, which remains well above the Fed's 2% target at 3.5% year-on-year.How Could Markets React to the Fed's Decision?In my view, a decision to leave interest rates unchanged would weigh on the US dollar while supporting demand for risk-sensitive assets, including gold. Expectations for such an outcome are already reflected in the US bond market, where Treasury yields have declined over the past three trading sessions.The US dollar could come under additional pressure depending on the tone of Federal Reserve Chair Kevin Warsh's press conference. If he once again delivers a cautious and non-committal message, while indicating that the Fed prefers to monitor developments in the Middle East and the domestic economy before taking further action, this could accelerate the US dollar's decline against the major currencies in the Forex market. In this scenario, the ICE US Dollar Index could fall below the 101 level and move towards 100.However, if the Fed unexpectedly raises interest rates, markets would almost certainly react in the opposite direction.

Forecast of the Day

GOLD

Gold is trading around 4,040.00 ahead of the Federal Reserve's monetary policy decision. If the Fed leaves interest rates unchanged, gold could receive additional support and rise initially towards 4,092.45, followed by 4,146.30. A break above 4,045.00 may provide a buying opportunity.

EUR/USD

The pair is trading near 1.1400. A decision to keep interest rates unchanged could drive EUR/USD higher towards 1.1470. A break above 1.1408 may provide a buying opportunity.