FOMC to stand pat on Wednesday - Barclays

Dhwani Mehta FXStreet

The Barclays Research Team offers their insights on what to expect from today Federal Reserve (Fed) monetary policy decision due to be announced at 1800 GMT.

Key Quotes:

“We believe that the Fed is likely to read the Q2 GDP report as we do. We see participants as discounting the contribution from trade given the policy uncertainty and focusing their attention on final sales to domestic purchasers. On net, it is likely that the committee will conclude that stimulus is passing through to activity as anticipated.

The August FOMC comes without a press conference or updated projections, leaving the FOMC statement as the only medium of communication. We think the main message will remain unchanged; in the face of sizeable stimulus, improving labor markets, and steadily firming inflation, further gradual rate hikes remain the most likely outcome.

We expect two further 25bp rate increases this year, in September and December.

The committee is also likely to debate further language changes to the statement, particularly regarding the assessment of the stance of policy and to what degree the committee wants to provide forward guidance about further gradual rate increase, but we see these changes as more likely to come closer to year-end.”

Author

Dhwani Mehta

FXStreet

Residing in Mumbai (India), Dhwani is a Senior Analyst and Manager of the Asian session at FXStreet. She has over 10 years of experience in analyzing and covering the global financial markets, with specialization in Forex and commodities markets.

GBP/USD finds support but stays below 1.3400

GBP/USD found support near 1.3370 after starting the week on the back foot but lost its recovery momentum after testing 1.3400 on Monday. The pair's upside remains capped as investors await clarity regarding the conflict in the Middle East. Later in the day, comments from central bank officials will be watched closely by market participants.

EUR/USD holds above 1.1400 as focus remains on Middle East

EUR/USD holds steady above 1.1400 following the bearish action seen during the weekly opening. As the uncertainty surrounding the US-Iran conflict keeps investors on edge, the pair's upside remains limited, while hawkish ECB expectations help the Euro stay resilient against its rivals. In the second half of the day, investors will pay close attention to comments from central bank officials.

Gold pares losses; keeps the red below $4,100 on hawkish Fed bets

Gold trims a part of its intraday losses during the first half of the European session, though it retains the negative bias for the second straight day and remains below the $4,100 mark. The US Dollar (USD) attracts some intraday sellers and supports the bullion. Any meaningful upside, however, still seems elusive amid a bearish fundamental backdrop.

Bitcoin retreats as Middle East conflict overshadows ETF inflows

Bitcoin struggles to hold above $64,000 after a modest recovery the previous week. Risk sentiment dampens as tensions in the Middle East escalated after the US launched fresh strikes on Iran on Sunday, weighing on BTC. Meanwhile, improving institutional demand, with spot Bitcoin Exchange Traded Funds ending an eight-week streak of net outflows, has provided only limited support amid rising geopolitical uncertainty.

The US won't default on $39 trillion debt: Why financial repression is coming and Gold is the only hedge

As the US national debt surges past $39 trillion, policymakers face an unsustainable economic trajectory that threatens the global financial system. With a formal default out of the question and fiscal austerity politically unfeasible, the US government is increasingly likely to rely on financial repression, artificially keeping interest rates below inflation to erode the real value of its debt.

Five sessions, one round trip: Why the whipsaw is exactly what Warsh ordered

Markets opened July with a December hike as the base case and spent five trading sessions unlearning and relearning it. A 57K payrolls print bled the tightening bets out of the strip; a re-shut Strait of Hormuz is pushing them back in. Wednesday's minutes from the June FOMC meeting landed mid-round-trip, describing a world that had already stopped existing.