FOMC preview: On hold until when?

Wells Fargo Research Team Wells Fargo

Summary

The FOMC is widely expected to leave the fed funds rate unchanged at its January meeting. There will be no update to the SEP at this meeting, and we expect the post meeting statement and press conference to signal maximum flexibility as the Committee strives to keep its options open. Our forecast remains for two 25 bps rate cuts at the March and June meetings, but the risks to our forecast look increasingly skewed toward later and possibly less easing this year. In fact, given our view on how growth will evolve this year, there is a sound argument that the longer they wait to cut, the higher the hurdle becomes to justify on economic grounds the need to ease further.

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Wells Fargo Research Team

Wells Fargo

EUR/USD remains on the back foot near 1.1740 post-US PMIs

EUR/USD is edging lower on Friday, giving back part of Thursday’s sharp rebound and drifting back toward the 1.1740 area amid the lack of clear direction around the US Dollar, which remains apathetic following the lower-than-expected results from flash PMIs in January.

GBP/USD keeps the firm tone around 1.3530

GBP/USD is building on its solid weekly advance and is pushing toward the 1.3530 area, or two-week highs, on the back of a modest retracement in the Greenback. In the meantime, strong UK retail sales figures and upbeat preliminary PMIs are reinforcing Cable’s gains as Friday’s session unfolds.

Gold trims gains, back to $4,950

Gold prices surged to a fresh record near $4,970 per troy ounce earlier on Friday, keeping the door open for a potential test of the $5,000 mark sooner rather than later. Mixed price action in the US Dollar, alongside falling Treasury yields across the curve, is underpinning the precious metal’s rally into the end of the week.