Top Story

Fed's September meeting minutes to play key role in dollar and gold direction

Highly anticipated minutes from the US Federal Reserve’s September meeting will be released Wednesday afternoon. This release takes on particular importance because of the three very conspicuous dissenting voters at the meeting (Rosengren, George, and Mester) who pushed unsuccessfully for a September interest rate hike. Typically displaying a more united front, the Fed’s newly divided monetary policy outlook has increased pressure on the Fed to raise rates and heightened expectations of a rate hike by the end of the year.

Adding onto these expectations have been a parade of Fed speakers, both voting and non-voting members, who have largely made hawkish comments in favor of raising rates sooner rather than later, even despite last week’s modestly weaker-than-expected US jobs report. The latest to speak was New York Fed President William Dudley, who remarked on Wednesday that the Fed’s delays in raising rates can be attributed more to “slack” in the labor market due to underemployment, and that inflation appears to be only slightly below target, unlike many European deflationary economies. These remarks undoubtedly place increasing emphasis on the next two US jobs reports preceding the all-important December Fed meeting.

Increasingly higher expectations for a December rate hike in recent days and weeks have helped to boost the US dollar sharply while weighing heavily on gold prices. Some of this impact has lately also been seen in the equity markets, as the S&P 500 benchmark has increased in volatility in the past few days, just recently breaking down below the consolidation that had been in place for the past month.

If Wednesday’s release of September’s Fed meeting minutes leans as much, or even more, to the hawkish side than is already suspected, market-viewed probabilities of a December rate hike, already lofty at above 70%, could rise even further. In this event, the dollar could get a further boost as the price of gold extends its fall and stock markets could enter a period of even higher volatility, especially when combined with the onset of earnings season and the volatility-inducing US presidential election just around the corner.

Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

The markets are moving. Stop missing out.