Financial markets have increased the odds of a Federal Open Market Committee rate hike this year, although the probability at the September and November meetings remains low, says Brown Brothers Harriman. The key event for markets this is Fed Chair Janet Yellen’s speech at the annual Jackson Hole symposium on Friday. Over the weekend, Vice Chair Stanley Fischer said that the Fed is nearing its targets, which implies that tightening isn’t far off. “To the extent that Yellen shares their assessments of the economy, we would expect her to largely echo the broad sentiments expressed by both (New York, Fed President William) Dudley and Fischer,” BBH says. “If she delivers a somewhat hawkish message this week, that should give the dollar more traction. Fed tightening expectations were buffeted last week first by hawkish Dudley comments, then by the more balanced FOMC minutes, and now by the Fischer comments. On net, the markets have adjusted the odds for tightening this year higher, and now stand at the highest odds since the Brexit vote.” The U.S. two-year yield rose above 0.75% to the highest level since June 23, while the while 10-year yield is approaching 1.60%. “Yet despite the strong jobs data in June and July, odds of a move on Sept. 21 or Nov. 2 are still low, with the Dec. 14 meeting seen as the most likely for the next hike,” BBH says.
By Allen Sykora of Kitco News; asykora@kitco.com
MKS: Gold, Silver Pressured Overnight By Fischer, Kuroda Comments
Monday August 22, 2016 09:04
Gold futures fell in overnight screen trading after comments from Federal Reserve Vice Chairman Stanley Fischer and Bank of Japan Governor Haruhiko Kuroda, says Alex Thorndike, senior trader with MKS (Switzerland) S.A. The metal remains softer in early New York trading, with the U.S. dollar stronger. Fischer’s remarks were construed as a sign that policymakers may still hike rates this year, while Kuroda was quoted by news organizations as suggesting Japanese rates could fall further into negative territory. “With the dollar on the up across the board in FX, the metals opened on very weak footing,” Thorndike says, adding that silver was “hardest hit,” with sell stops triggered in light liquidity during Asia-Pacific trading. Around 8:45 a.m. EDT, spot gold was down $3.60 to $1,337.30 an ounce, while silver was 32.6 cents lower to $18.95. The dollar index was up 0.125 point to 94.636. “Technically we are still looking at similar levels with immediate support for gold lying at $1,330-35 and topside resistance edging lower to $1,355-60, with last week’s double tops of $1,356 and $1,358, as well as the downtrend line dating back to the post-Brexit highs which currently cuts in around $1,358-60,” Thorndike says. “Gold remains fairly resilient for the time being, although we are not as bullish as we were previously given that key levels have not been able to be breached to the topside, especially taking into account the general USD weakness over the past week.”
By Allen Sykora of Kitco News; asykora@kitco.com
Walsh’s Lusk: All Eyes In Gold Market On Friday Yellen Speech
Monday August 22, 2016 09:04
The key event for gold this week will come on Friday when Fed Chair Janet Yellen speaks at the annual Federal Reserve symposium in Jackson Hole, says Sean Lusk, director of Walsh Commercial Hedging Services. In the meantime, he says, there could be some profit-taking in gold futures. Much of the market’s focus lately has been trying to gauge when the Fed could hike interest rates again, in particular as early as September. The last nonfarm payrolls report exceeded expectations and a number of Fed officials made hawkish comments last week, although Lusk notes there has been a reluctance of investors to price in another Fed move next month. However, traders may receive some more clarity on the issue at the Fed symposium Friday, he continues. “At that meeting Fed Chair Yellen is likely to clarify her expectations for the pace of any future rate increases,” Lusk says. He adds that “this uncertainty that could have weak longs exiting positions ahead of Yellen’s comments.”
By Allen Sykora of Kitco News; asykora@kitco.com
