Fed Meeting Kicks-Off – What to Expect?

Market players are unlikely to be overly surprised if the Federal Reserve raises US interest rates by another 25 basis points this afternoon, as this has been widely expected by many.
Lukman Otunuga
fed

June’s Fed meeting could still be a market shaker as investors direct their attention towards the hotly-anticipated economic projections from Chairman Jerome Powell. Markets will most likely exploit today’s policy meeting to gain fresh insights into how fast the Federal Reserve may raise interest rates again in the second half of 2018. With inflation accelerating and economic data from the United States expected to take a positive trajectory, there is a suspicion that we might see increased interest rate expectations. If the central bank expresses optimism over the forecast of future US interest rate increases, this could be viewed as hawkish by financial markets.

All attention will be on Fed Chair Jerome Powell, who is likely to be quizzed over the state of the US economy, rate hike timings and the impact of trade tensions during his press conference. Expectations that the Fed might adopt a more aggressive approach towards monetary policy normalization this year will grow if Powell announces that he will hold press briefings after every meeting. All in all, a hawkish Fed statement is likely to boost the Dollar, which remains sensitive to monetary policy speculation.

Speaking of the Dollar, the currency has appreciated against its major counterparts this morning. The Dollar Index remains comfortably bullish on the daily charts with 94.00 in sight. Prices are trading above the 20 Daily Simple Moving Average while the MACD has crossed to the upside. A breakout and daily close above 94.00 could encourage an incline higher towards 94.30 and 95.00, respectively. A failure for bulls to secure a close above 94.00 could encourage a decline back towards 93.60.

Gold pressured ahead of Fed meeting

Gold is feeling the heat ahead of the FOMC meeting this afternoon, which is expected to conclude with a US interest rate increase.

Although geopolitical tensions and uncertainty initially supported the yellow metal, a Fed interest rate hike could punish zero-yielding Gold. Investors will continue to observe how prices behave around the $1300 mark, before and after the Fed meeting. Focusing on the technical picture, a solid close above $1300 may open a path higher towards $1324. Alternatively, sustained weakness below the $1300 level could invite a decline back towards $1280.

Gold Weekly Chart
Gold Weekly Chart

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