- As expected, the Federal Reserve has raised rates by 25 bps and opened the door to more.
- Fed Chair Powell has refused to commit to any policy moves, allaying fears of more hikes.
- With four more critical reports until the next rate decision, markets are set to extend gains.
Please make it stop – that is what investors must feel in response to the seemingly endless tightening cycle. The Federal Reserve has only gently pushed back against markets by indicating calling for patience and stressing the importance of data.
Fed Chair Jerome Powell refused to give forward guidance and stressed the importance of data. The bank will make decisions on a meeting-by-meeting basis. While it upgraded its comments on the economy – moderate instead of modest growth – it sees expansion as a good thing.
Regarding the burning topic of inflation, the Fed is holding off the champagne bottles, saying the latest report could be a one off. Nevertheless, it sees current policy as restrictive.
In his well-balanced and message, there was one word that stood out – patience. It means no urge to raise rates. I expect markets to focus on this message and run with it.
Fed Chair Powell's will have another major opportunity to speak – the Jackson Hole Symposium on August 25. Historically, that is where he and some of his predecessors signaled policy changes. Will he seize the chance? Until then, the Fed will have another Nonfarm Payrolls (NFP) and another Consumer Price Index (CPI) report.
If he refrains from clear messages at that Wyoming gathering, Powell and his colleagues will still have another NFP and a last CPI before the Fed's September decision. With growing signs of cooling in the services sector – 70% of the US economy – and global headwinds, pressure will likely grow on the Fed to end. Investors know that.
Why am I so convinced markets will rise? The Fed said it is data-dependent, and the most critical figure is falling fast – core inflation. Underlying price rises slowed to 4.8% YoY in June, and there seems to be no turning back. This is below the Federal Funds Rate (FFR). And once again: patience.
What does it mean for traders? If my analysis is correct, it means the current bounce in the US Dollar is a selling opportunity, the meltdown in Gold is a buying opportunity, and stocks offer another "buy the dip|" opportunity. There will likely be a lot of back and forth, but the direction of travel is "risk-on."
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks
EUR/USD extends slide below 1.0770 as Dollar holds firm Premium
EUR/USD dropped below 1.0770 falling to the lowest level in three weeks. The pair continues to face downward pressure as the market considers the European Central Bank will cut interest rates before the Federal Reserve.
GBP/USD drops to 12-day lows near 1.2550
GBP/USD broke below 1.2580, falling to the 1.2550 area, the lowest level since November 24. The US Dollar stays resilient despite softer US labour market data and lower yields. More jobs figures are due with Jobless Claims on Thursday and NFP on Friday.
Gold faces mixed risks, fails to capitalize on lower yields Premium
Gold recovered toward $2,030 after testing $2,020 earlier in the day. The benchmark 10-year US Treasury bond yield declined to its lowest level in three months below 4.15% after US employment data and helped XAU/USD gain traction.
XRP price aims at $0.7 as Ripple whales accumulate $37 million worth of tokens in three weeks
XRP price has been moving sideways for the past few days after greatly benefitting from the partial win it attained in the lawsuit filed by the Securities & Exchange Commission (SEC). However, Ripple’s CEO decided that the credit largely goes not to himself or the company but to its supporters.
Tesla Stock Forecast: TSLA downtrend likely to continue as Goldman calls it a top short among hedge funds
Tesla (TSLA) stock has been edging higher on Wednesday, outperforming the NASDAQ Composite for the most part, but institutional bearishness parallels the lackluster performance over the past four months and CEO Elon Musk’s recent ho-hum Cybertruck event.