After The Fed’s Meeting: four interest rate hikes are expected to detonate the market

The minutes after the Fed meeting, a countdown began for four interest rate hikes which are expected to detonate the market

  The Fed will announce the minutes of the June FOMC policy meeting at 02:00 am Beijing time on Friday (July 6), and discussions on how US interest rates should rise may become the focus. Discussions about inflation may provide some clues to raising interest rates.

  The minutes of the meeting may also indicate that officials debated the growing dispute between the United States and its major trading partners, the dollar’s strength and the risk of flattening the yield curve. These concerns may curb expectations of accelerating the pace of interest rate hikes.

  At a press conference after the meeting, Fed Chairman Powell poured a cold water on the idea that policymakers can accurately measure the level of interest rate impact on the economy, and it is the key to deciding when to stop raising interest rates. But Joseph Song, a senior US economist at Bank of America, said this would not stop discussions between policymakers.

  Song said: “This is still what they are trying to estimate, but it is still an important part of the policy line. It is significant to know the scope of this expectation and whether the Fed believes it can reach this level.”

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  As the unemployment rate fell to its lowest level since 2000, the inflation rate rebounded to the 2% target, officials raised the target range of the benchmark federal funds rate to 1.75% to 2%, and announced at the meeting last month. New forecast.

  The Federal Open Market Committee raised the median forecast for a 2018 rate hike from three to four, although this situation was caused by an unidentified official changing his or her predictions. Neutral expectations have not changed and remain at 2.9%.

  Song pointed out that the minutes of the meeting “may fall back to some of the hawkish effects expected in June.”

  Whether the Fed will raise interest rates once or twice during the year is likely to depend on actual inflation data and inflation expectations. The Fed has repeatedly mentioned “symmetric” inflation targets in the past two statements, which many believe is a sign that policymakers can tolerate inflation slightly above the target.

  In May, the Fed’s annual price increase index reached 2.3%. Gus Faucher, the chief economist at PNC Financial Services Group, pointed out that although the meeting was held before the inflation data was released, Friday’s meeting minutes may provide some signals of how Fed officials will respond to higher inflation.

Investment bank reveals why the recent rebound in gold prices is expected to hit $1,300 during the year.

According to TD Securities, after a near one-year low in June, gold prices are expected to recover and continue to rise in the remaining months of the summer. The lack of “fuel” in the iterative trade war and the weakening of the dollar are factors that support the price of gold.

  TD Securities Global Strategy Director Bart Melek wrote in a report released on Monday (July 9): “The price of gold is expected to exceed $1,270 per ounce in the summer. In fact, if the price of gold rises in the last three months of 2018 We are not surprised by $1300/oz.”

  Melek pointed out that gold has started to recover last week, and COMEX August gold futures rose from $1,240 per ounce to around $1,260 per ounce.

  Melek wrote: “The weaker dollar, lack of interest in risky assets and the decline in long-term bond yields were key factors in the rise in gold prices last week. The bond yield curve was further flattened, which triggered a possible end to the current US economic expansion. Guessing and worrying, this is another important reason why gold prices have performed relatively well in recent days.”

  The report emphasizes that in the short term, some market speculators may recover their hawkish prospects on the issue of the Federal Reserve’s (FED) tightening of monetary policy, which will benefit the gold price.

  Melek added that the strength of emerging market currencies will also play a key role in boosting gold prices this summer.

  At the same time, Melek expects that as the European Central Bank (ECB) prepares to raise interest rates, the dollar’s gains will fall back, which is another good sign of gold.

Daniel Ghali, a commodities strategist at TD Securities, pointed out that investors may turn their attention to macroeconomic data as the trade war between China and the US has not been seriously upgraded this week.

  Ghali writes: “US inflation data may become the focus of precious metals traders, CPI and PPI will be released this week. But in addition to macro data, with US President Trump visiting Europe, market participants may also pay attention to NATO Summit.”

  Ghali explained: “Given the recent stock market unease and the resurgence of global economic growth that will be driven by trade, traders may interpret inflation weakness as a sign that the Fed may still abandon radical interest rate increases.”

  This week, investors will usher in some heavy data, the most important of which will be the US Consumer Price Index (CPI) on Thursday.

  Analysts pointed out that if consumer inflation data continues to maintain current trends or accelerate, then the dollar may be rebound, as the possibility of another rate hike in 2018 will rise further. However, if the CPI and the last Friday’s wage data echo and fall back, it may lead to the suppression of the dollar, which will benefit the gold price.

BIS general manager worries about a “Systemic Threat” Of Bitcoin

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BIS general manager worries about a “Systemic Threat” Of Bitcoin, Prompts “Pre-emptive regulation” From Law enforcement “If authorities do not act pre-emptively, cryptocurrencies could become more interconnected with the main financial system and become a threat… ” The general manager of the Bank for International Settlements (BIS) has pummeled bitcoin as a “combination of a bubble, a Ponzi scheme, and an environmental disaster.” Augustin Carstens asked Tuesday the sustainability of bitcoin and other cryptocurrencies and suggested federal government had a responsibility to shut down on the monetary technology

FED & BOE TO MOVE THE MARKETS

The central banks of the U.S. and the U.K. will be holding their monthly sessions this week to decide on where to set key interest rates. Investors worldwide will be watching these key events closely as they can greatly affect USD and GBP pairs*

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FED Webinar
Wednesday @18:45 GMT
The EUR/USD climbed after the U.S. Federal Reserve voted to leave rates unchanged at 1.25% last month, highlighting “solid” economic growth. This left room for another rate hike in December with analysts claiming that a rate hike is highly likely this month pricing in the odds at 100%, according to Investing.com’s Fed Rate Monitor Tool.
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BOE Webinar
Thursday @11:45 GMT
As expected, the Bank of England decided to increase interest rates in November, marking the first rate hike in the last decade. Specifically, the BoE increased the benchmark interest rate from a record low of 0.25% to 0.50%, which effectively reversed the last rate cut in the wake of the Brexit referendum. The rate hike was widely anticipated, however, which led to a sell-off of the sterling and caused the EURGBP to rally.
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*Source: investing.com
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What do the analysts expect this month?

Release Forecast* Previous*
FED Interest Rate Decision 1.50% 1.25%
BOE Interest Rate Decision 0.50% 0.50%
*Table source: investing.com

How might the Forex Markets be affected?

icon A generally hawkish stance and/or a higher than expected key interest rate can be considered as positive/bullish for USD and GBP pairs.*
OR
icon A dovish monetary outlook and or a lower than expected rate is expected to have a negative/bearish effect on USD and GBP pairs.*