The Federal Reserve holds eight regularly scheduled meetings during the year along with any other meetings which are needed. It is during these meetings when voting members of the Federal Reserve will solidify its monetary policy and announce it to the public through a written statement as well as Chairman Powell’s press conference which follows the conclusion of the meeting.
While it is fairly certain that the Federal Reserve will not fast-forward the timeline to raise their Fed funds rate (the interest rate that banks and other depository institutions lend money to each other), they will be discussing their current asset purchases of $120 billion monthly. Many analysts believe that to continue to purchase mortgage-backed securities in an already extremely heated housing market is unneeded. According to GlobalPropertyGuide despite the pandemic, new home sales were up 43.2% on the year, and U.S. homebuilder sentiment is now at its highest for 35 years. Demand continues to exceed supply with existing home sales rising by 10.5% year over year.
Citibank’s U.S. economists “expect the July 28 FOMC meeting to be broadly neutral, with the Fed acknowledging the possibility of a new Covid wave while remaining optimistic about the outlook and watchful for upside inflation risks.”
They also “expect the Fed to have detailed discussions about tapering, and likely make some decisions about the nature of tapering and policy sequencing, but without disclosing full details or timing.” Their net takeaway is that they are biased to fade U.S. dollar strength. That being said the U.S. dollar is still near its strongest level since early April. Currently, the dollar index is fixed at 92.50 which is a net decline of 15 points, or -0.16%. In April the dollar index traded to a high near 93.50.
As of 5:08 PM EST gold futures basis, the August 2021 Comex contract is fixed at $1798.80 which is a net decline of $0.40. Gold futures traded to a high today of $1805.40 and a low of $1792.80. This extremely subdued trading range can be attributed to market participants awaiting the conclusion of the FOMC meeting tomorrow.
This is because the C.D.C has just revised its decision made two months ago once again suggesting that vaccinated individuals resume wearing masks in public indoor spaces in parts of the country where the virus is surging. This most recent surge in new Covid cases is a direct result of the Delta variant which is a much more contagious variant affecting even those individuals who are fully immunized. In a news briefing today Doctor Rochelle Walensky, director of the C.D.C said, The Delta variant is showing every day its willingness to outsmart us.”
With the recent uptick in new Covid-19 cases, it seems highly unlikely that the Federal Reserve will enact any strong modifications to their current monetary policy.
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Wishing you, as always, good trading and good health,