Palladium prices declined during Wednesday’s trading as markets closely awaited the Federal Reserve’s interest rate decision.

The Federal Reserve is set to announce its policy decision later today, with expectations pointing toward an interest rate cut.

Last month, UBS raised its palladium price forecasts by $50 per ounce across all time horizons, citing expectations that the market will continue to experience a slight supply deficit through next year.

UBS said sentiment in the options market toward palladium remains moderately positive, although it has moved closer to neutral compared with the beginning of the year.

The implied volatility spread between call and put options for the one- to six-month period currently stands between 1.8% and 2.4%, down from a peak range of 3.4% to 9.1% earlier in the year.

The earlier rise in optimism, from early November 2024 to late January 2025, was likely driven by concerns over potential new sanctions targeting Russian palladium exports. Russia accounts for about 40% of global mine supply, but as Russian metal continues to flow into markets, concerns about supply disruption have eased.

Near-term price volatility will depend largely on the results of the U.S. Department of Commerce’s Section 232 investigation into critical minerals, as well as the anti-dumping petition filed by Sibanye and the United Steelworkers union.

Market participants are awaiting the U.S. administration’s decision on whether to impose tariffs on palladium imports.

Despite raising its price target, UBS noted that it sees greater upside potential in other precious metals compared with palladium, even as the palladium market is expected to remain in a slight supply deficit through 2026.

Meanwhile, the dollar index fell 0.2% to 99.02 points by 16:32 GMT, after hitting a high of 99.2 points and a low of 99.00 points.

As for trading, palladium futures for March delivery fell 2.8% to $1500.0 per ounce at 16:32 GMT.

Bitcoin posted gains on Wednesday after a mild recovery, as investors positioned themselves ahead of a widely expected Federal Reserve decision to cut interest rates later today. However, the advance remained limited by expectations of hawkish policy signals.

The world’s largest cryptocurrency rose 1.2% to trade at $92,672.7 at 01:55 Eastern Time (06:55 GMT, after climbing above $94,000 on Tuesday.

Bitcoin has remained range-bound in recent days following one of its steepest monthly declines in years during November, when risk assets broadly retreated.

The Fed is expected to deliver a “hawkish cut”

Market expectations point to a 25-basis-point reduction later today, with probabilities above 85%.

But investors anticipate policymakers will signal that further easing is not guaranteed, given still-elevated inflation and deep divisions inside the Federal Open Market Committee.

With the decision due this evening, comments from Fed Chair Jerome Powell — alongside updated economic projections — will be crucial in shaping market sentiment.

A more hawkish tone could strengthen the US dollar and push Treasury yields higher, reducing appetite for non-yielding, high-risk assets such as Bitcoin.

It could also slow inflows into exchange-traded crypto products, which saw robust demand earlier in the year amid optimism over the global AI-investment cycle and rising institutional exposure to digital assets.

With global markets in wait-and-see mode and volatility elevated, analysts expect Bitcoin to trade within a narrow band until the Fed provides clearer direction.

US regulators: banks can act as intermediaries in crypto transactions

The US Office of the Comptroller of the Currency said Tuesday that American banks are now permitted to act as intermediaries in digital-asset transactions, a move that strengthens integration between the traditional financial sector and the digital-asset economy.

Under the new guidance, national banks may conduct “risk-less principal” crypto transactions — buying and reselling assets simultaneously without holding them on their balance sheets.

The decision aligns with broader regulatory efforts by the current administration to lower barriers between Wall Street and the crypto sector.

Crypto prices today: Ethereum jumps 7%

Most major altcoins recorded gains on Wednesday, outperforming Bitcoin.

Ethereum, the world’s second-largest cryptocurrency, rose 6.8% to $3,323.92.

XRP, the third-largest token, gained 2% to $2.08.

Oil prices held steady on Wednesday as traders monitored any progress in peace talks between Russia and Ukraine, while awaiting the Federal Reserve’s interest-rate decision.

After falling around 1% in the previous session, Brent crude rose $0.07, or 0.1%, to $62.01 a barrel by 10:39 GMT. US West Texas Intermediate gained $0.10, or 0.2%, to $58.35 a barrel.

Two market sources citing American Petroleum Institute data said Tuesday that US crude inventories fell by 4.78 million barrels last week, while gasoline stockpiles rose by 7 million barrels and distillate inventories increased by 1.03 million barrels. Official government data is due at 15:30 GMT.

Meanwhile, investors broadly expected the Federal Reserve to cut its benchmark rate by a quarter point on Wednesday to support a cooling labor market.

Lower interest rates can boost oil demand by stimulating economic growth, though gains remain capped by concerns that supply may outpace consumption. Analysts at ING noted that the oil market is moving toward a larger surplus, while Russian supply remains a key risk.

Ukrainian President Volodymyr Zelensky said his country and its European partners will soon provide the United States with “revised documents” for a peace proposal aimed at ending the war with Russia.

A peace agreement between Russia and Ukraine could lead to a lifting of international sanctions on Russian companies, potentially freeing up currently restricted oil supply.

Separately, the US Energy Information Administration said it expects US oil production to rise more than previously forecast this year. It raised its 2025 output estimate by 20,000 barrels to a record average of 13.61 million barrels per day, but cut its 2026 forecast by 50,000 barrels to 13.53 million barrels per day.

Sterling edged slightly higher against the US dollar and held broadly steady versus the euro on Wednesday, as investors awaited the Federal Reserve’s policy decision later in the session, along with UK GDP data due on Friday.

The US dollar weakened against both the euro and the yen as markets positioned for an interest-rate cut accompanied by a potentially hawkish message from the Fed.

The pound rose 0.10% against the dollar to 1.3313, after touching 1.3385 last week — its highest level since 21 October. The currency has gained about 1% since Finance Minister Rachel Reeves delivered the budget on 26 November.

Francesca Fornasari, head of currency at Insight Investment, said sterling had benefited from “post-budget relief,” noting that “a lot of bad news was already priced in before 26 November.”

Looking ahead, she added that the pound will need stronger growth-related data to outperform its European peers.

Some analysts pointed to modestly positive revisions to last week’s PMI figures, suggesting that the UK economy is not slowing as sharply as previously feared. Meanwhile, several companies reported delaying investment due to uncertainty surrounding Reeves’ budget.

Expectations for the UK’s growth outlook remain mixed.

Mark Dowding, chief investment officer at BlueBay at RBC BlueBay Asset Management, said: “Weaker UK growth expectations suggest there is room for the Bank of England to surprise markets with more rate cuts than currently priced in.”

UK GDP figures will be released on Friday.

Investors are also awaiting next week’s Bank of England rate decision. Several policymakers expressed differing views on Tuesday regarding the future of monetary policy, highlighting the continued division within the Monetary Policy Committee.

Markets are pricing a 50-basis-point cut by next summer, alongside a roughly 90% probability of a rate reduction next week.

The euro inched up 0.02% against sterling to 87.43 pence, after reaching 87.21 pence on Tuesday — its lowest level since 24 October.

Money markets have recently scaled back expectations for a potential rate cut from the European Central Bank, offering support to the euro.