Can the Federal Reserve Really be Forced into Action?

U.S. President Donald Trump keeps pushing the Federal Reserve to yield to his accommodative policy demands which include a 100 bps rate cut and to bring quantitative easing on top to help push the global economy back higher; this would also help the US economy dominate all other economies of the world.

All eyes are now on Jay Powell's speech at Jackson Hole on Friday and whether the Fed can actually be forced. Looking at Rosengren's comments last night, who was a hawkish dissenter during the last FOMC meeting, he made it clear that he does not think it is the Fed's mandate to help the global economy with rate cuts for the US if the domestic economy is doing well, which it is, therefore a wait and see approach even if  focusing on the data would be the best approach in this case.  

 

Global Bourses Edge Higher

Meanwhile, global stock markets continued to edge higher as investors digested a cooling of recession fears and rising hopes of monetary policy stimulus from central banks. Investors will now be looking closely at the U.S. Federal Reserve and whether it will bow down to the US government's pressure, also in the absence of news around the US and China trade standoff.

 

Forex Preview: USD Reigns  

The USD remains the strongest currency around and should the Fed stay on course, it has good chances to advance further up. The RBA's minutes this morning mentioned that rates could go lower and to expect low rates for an extended period of time and that the risks for the economy have tilted to the downside, while the growth in Q2 was firmer so all in all, it did not move the AUD too much at the moment. Elsewhere the EUR had weaker CPI figures yesterday and paired with the weakness of the EU economy any USD strength could send the EUR further down.

 

Oil Prices Rally

Oil prices rallied along with global risk markets yesterday, but they did not break any significant levels to the upside. Oil prices steadied today but they could turn south again once risk-off becomes more dominant, and there are plenty of reasons why this could happen sooner rather than later.

 

Should We Buy The Gold Dip?

Elsewhere, gold prices steadied after declining more than 1% in the previous session hit by an uptick in risk appetite, while investors await meetings by policymakers later in the week. Currently, XAU/USD is trading below the key $1,500 level. XAU/USD will be very dependent on what the Fed will do on how much Gold may correct further lower, though ultimately it seems developments of a recession-type slowdown are present globally and therefore Gold appears to have a good risk/reward ratio to be bought on dips.  

 

Bitcoin Edges Higher

BTC traded higher overnight climbing above the 10.8k and retested yesterdays resistance at 10.7k from the upside. BTC/USD is currently set to test the 11K level.