CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. The vast majority of retail investor accounts lose money when trading CFDs. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.

FED

FOMC meeting review - the Fed injects life back into FX, rates and Gold market

Chris Weston
Chris Weston
Head of Research
Jun 17, 2021
We questioned if the FOMC meeting could spur some life back into the markets and eyed upside risks to the USD.

Well, we saw that front and centre in the bond and interest rates markets. This spilt over into FX, Gold and to a lesser extent crypto too. Equities and specifically Tech, were surprisingly calm given the moves in real rates.

The stage is set for what I feel is a period of somewhat higher volatility as the narrative changes and traders adjust to a future reduction in liquidity conditions. Powell et al will make it clear that any changes will be glacial and will be communicated well in advance and there's no reason to believe we’ll see a collapse in risk sentiment. However, should we see higher real rates in the bond market then we should see a higher USD regime and this will mean Gold will become a sell on rallies candidate. Emerging market FX could be a good guide here.

The Fed’s do plot projections have been the main attraction, but many question why on earth so many voters are calling for hikes in 2023 when core inflation is expected to fall back from 3% to 2.1% and around policy target? Still, the Fed downplay these projections, but the market has spoken and we’ve seen some aggressive repricing of the US interest markets, with Eurodollar futures pricing in 17bp, or 70% of one hike, by 2024 from this meeting alone.

Do look at the short video above as it gives a sense of the key dates that could rock markets from here, as we head through the Northern Hemisphere Summer and the potential for changes to Fed and other central bank policy settings.

Ready to trade?

It's quick and easy to get started. Apply in minutes with our simple application process.

The material provided here has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Whilst it is not subject to any prohibition on dealing ahead of the dissemination of investment research we will not seek to take any advantage before providing it to our clients. Pepperstone doesn’t represent that the material provided here is accurate, current or complete, and therefore shouldn’t be relied upon as such. The information, whether from a third party or not, isn’t to be considered as a recommendation; or an offer to buy or sell; or the solicitation of an offer to buy or sell any security, financial product or instrument; or to participate in any particular trading strategy. It does not take into account readers’ financial situation or investment objectives. We advise any readers of this content to seek their own advice. Without the approval of Pepperstone, reproduction or redistribution of this information isn’t permitted.