Phil Carr
The Gold & Silver Club
After an already action-packed start to the year – and just when traders thought things couldn't get any more exciting – we could be inching closer to the end of the current rate-hike cycle, a lot faster than expected!
Earlier, this week the Bank of Canada, raised its key interest rate by a quarter of a percentage point, but surprised traders as it signaled a readiness to put further rate hikes on hold for the time being.
The prospect of a series of aggressive interest rate increases coming to an end served to weaken the Canadian dollar versus the U.S. dollar. But the real interesting twist was that the U.S dollar, in turn, weakened versus its major rivals – ultimately indicating traders have already begun pricing in a possibility that the Federal Reserve could follow suit after delivering what's expected to be a quarter-point hike next week.
In a note to clients, two of the most powerful Wall Street banks highlighted the importance of the Bank of Canada decision as a potential “inflection point” in what's been an aggressive tightening cycle by most of the world's major central banks.
There is no deny that traders are growing more and more confident day by day that central banks will pause their interest rate hikes or even bring them to a complete end – as more signs emerge that global inflation is slowing.
With that in mind on Friday, trader’s attention will be on the Fed's favourite measure of inflation – The Core Personal Consumption Expenditures Price Index – as the outcome will almost certainly play a very influential role in the Fed's next rate hike decision.
Having stepped down to a 50 basis point rate increase last month – following four consecutive super-sized 75 basis point rate hikes – the Fed is considering whether it can ‘pivot further’ to a more typical 25 basis point hike at its upcoming meeting. This monumental move may lead to the eventual end of hikes a lot quicker than anyone is expecting.
Where are prices heading next? Watch The Commodity Report now, for my latest price forecasts and predictions:
Trading has large potential rewards, but also large potential risk and may not be suitable for all investors. The value of your investments and income may go down as well as up. You should not speculate with capital that you cannot afford to lose. Ensure you fully understand the risks and seek independent advice if necessary.
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