European Shares, US Futures Mixed; Mnuchin Decision Reduces Fed’s Lending Power

The major European stock indexes and U.S. stock market futures are trading mixed on Friday with stocks in Europe edging cautiously higher and U.S. futures trying to claw back earlier losses. Besides the coronavirus drag and vaccine optimism, investors are being asked to deal with conflicting prospects for U.S. fiscal and monetary stimulus.

At 10:29 GMT, the U.K.’s FTSE 100 is trading 6379.24, up 44.89 or +0.71%, Germany’s DAX is at 13147.54, up 61.38 or +0.47% and France’s CAC 40 is at 5513.42, up 38.76 or +0.71%.

In the United States, December E-mini NASDAQ-100 Index futures are trading nearly flat, and the December E-mini S&P 500 Index and December E-mini Dow futures are trading slightly lower. All three indices are rebounding from early session weakness.

European Shares Supported by Gains in Commodity, Retail Stocks

European stocks edged higher on Friday as gains in commodity and retail shares offset worries about U.S. politics and an impasse over fresh stimulus measures to support a pandemic-stricken global economy.

Stocks were on track for marginal weekly gains after signs of progress on COVID-19 vaccine pushed the index to February highs earlier this week.

Energy stocks were among the top gainers on oil prices steadied, putting them on course for a third straight weekly rise on prospects of an effective COVID-19 vaccine. Miners also jumped over 1% on stronger metal prices.

Treasury Yields Fall After Mnuchin Pulls Plug on Fed Lending Power

U.S. Treasury yields declined on Friday after U.S. Treasury Secretary Steven Mnuchin decided to let several of the Federal Reserve’s emergency funding programs expire on December 31.

The yield on the benchmark 10-year Treasury note slipped to 0.836% at 09:38 GMT ET, while the yield on the 30-year Treasury bond fell to 1.547%.

Treasury yields dropped after Mnuchin issued a letter on Thursday that said he would not extend the Fed’s programs that used Congress’ CARES Act funds. This reduces the Fed’s ability to support the financial system.

The Fed pushed back on Mnuchin’s decision, saying:  “The Federal Reserve would prefer that the full suite of emergency facilities established during the coronavirus pandemic continue to serve their important role as a backstop for our still-strained and vulnerable economy.”

For a look at all of today’s economic events, check out our economic calendar.

US Economy’s Rocky Recovery Needs Fiscal Stimulus Jolt

Progress towards a U.S. stimulus deal has boasted sentiment in world markets all week. Although it seems Washington politicians have been treating the new fiscal stimulus package as another weapon to divide the Republican and Democratic parties as well as voters, independent Federal Reserve policymakers see it as a necessity to smooth out a rocky recovery and lift some of the uncertainty being fueled by another resurgence in COVID-19 cases.

US Economy’s Recovering Slowly, But Some Sectors Struggling – Fed Survey

The Federal Reserve said on Wednesday the U.S. economy continued to recover at a slight to modest pace through early October as consumers bought homes and increased spending, but the picture varied greatly from sector to sector.

The Fed’s Beige Book report was decidedly more upbeat than the September version, with more districts using the words “positive” and “optimistic” to describe various aspects of their local economies.

Still, the Fed’s Beige Book pointed to the kind of uneven recovery that officials warn may become a more-or-less permanent state of affairs unless there is more federal relief.

Fed’s Brainard Calls for More Fiscal Aid for Economy

Despite a “heartening” bounce-back from the initial hit to the U.S. economy delivered by the COVID-19 pandemic, the recovery is uneven and uncertain and will require continued support to ensure it becomes broad-based and sustainable, Federal Reserve Governor Lael Brainard said on Wednesday.

The economy’s overall improvement, however, masks big disparities among sectors and among Americans that could hold back the recovery.

Brainard said the biggest risk to her outlook for recovery is that fiscal support from the federal government will be withdrawn too soon. It’s a view widely shared by her Fed colleagues. Talks on a new pandemic relief package are ongoing, but prospects remain dim for the Republican-controlled Senate to approve any aid before the November 3 election.

“This strong support from monetary policy – if combined with additional targeted fiscal support – can turn a K-shaped recovery into a broad-based and inclusive recovery that delivers better outcomes overall,” Brainard said.

“Premature withdrawal of fiscal support would risk allowing recessionary dynamics to become entrenched, holding back employment and spending, increasing scarring from extended unemployment spells, leading more businesses to shutter, and ultimately harming productive capacity,” Brainard said.

Fed Has Done Its Job

The recently adopted monetary policy strategy by the Federal Reserve ensures that policymakers will not tighten policy too soon. With the Fed pledging to keep rates at their current near-zero level for years and likely to raise them only gradually to keep rates at levels designed to stimulate economic growth, central bankers are doing their job to keep the recovery sustainable. But in order for the policy to work, the economy needs another jolt of fiscal stimulus, not unlike a booster-shot.

With the effects of the first rounds of fiscal stimulus fading, and coronavirus cases rising, there is risk of secondary recession without new financial aid from the government.

For a look at all of today’s economic events, check out our economic calendar.

Fed Minutes: Policymakers Divided Over How to Apply New Policy Framework

The Federal Open Market Committee on Wednesday released minutes from its September 15-16 meeting. The Fed’s policymaking arm held interest rates steady at the meeting and approved language outlining its new approach to inflation.

Among the highlights in the minutes, Federal Reserve officials worried about what would happen if fiscal aid would decrease or disappear. Additionally, the central bank held its benchmark interest rate near zero and said it would stay there until inflation averaged at least 2% over a period of time. However, officials said they didn’t see the need for providing clearer guardrails for what it would take to raise rates.

Unease Among Officials Over New Interest-Rate Strategy

Federal Reserve Chairman Jerome Powell and his allies on the central bank policymaking board faced skepticism and opposition in trying to guide markets about the future path of interest rates, minutes of their September meeting released Wednesday revealed.

After their meeting, the FOMC released a statement vowing to keep interest rates near zero until inflation is on track to moderately exceed the central bank’s 2% target for some time. Fed officials also released projections showing they expected rates would stay near zero until the end of 2023 at least.

There were two dissents from the new forward guidance from the ten voting members of the committee. It wasn’t known until the minutes were published Wednesday that unease about the new policy was fairly broad among the remaining seven officials who didn’t vote.

According to the minutes, “several” of these Fed officials balked at the strategy, in part because the guidance could limit the central bank’s flexibility. They also argued that by influencing the market’s view about the future path of short-term interest rates, “such guidance could contribute to a buildup of financial imbalances that would make it more difficult for the FOMC to achieve its objectives in the future.”

A “couple” of Fed officials argued against the strategy for different reasons. They wanted the Fed commitment to keep interest rates near zero to be even stronger and less qualified. They wanted the Fed to say that the policy rate would remain near zero until inflation had moved above 2% for some time.

In what might cause confusion to investors, Fed officials stressed the new strategy was not “an unconditional commitment” to a particular path of interest rates. Information pointing to a stronger economic recovery in the wake of the coronavirus pandemic would tend to lead to expectations for a shorter period of rates kept near zero and vice versa, the Fed said.

FOMC Says Current Forward Guidance is Sufficient

Traders have been looking for enhanced forward guidance about what specific benchmarks the FOMC would use as criteria. However, members said that the new language indicating a target of inflation averaging above 2% for a period of time would be sufficient.

“Most participants supported providing more explicit outcome-based forward guidance for the federal funds rate that included establishing criteria for lifting the federal funds rate above the [current level near zero] in terms of the paths for employment or inflation or both,” the minutes said. “However, with longer-term interest rates already very low, there did not appear to be a need for enhanced forward guidance at this juncture or much scope for forward guidance to put additional downward pressure on yields.”

For a look at all of today’s economic events, check out our economic calendar.

Fed News: Bullard’s Hawkish View on Strength of Recovery Contrasts With Powell’s Dovish Outlook

The week began with a slew of Federal Reserve speakers, who investors were hoping would shed light on the U.S. central bank’s new approach to inflation. Federal Chairman Jerome Powell is due to appear before Congressional committees all week, while Fed committee members Lael Brainard, Charles Evans, Raphael Bostic, James Bullard, Mary Daly and John Williams are also scheduled to make public speeches.

The general consensus among traders suggested that if Jerome Powell and the other Fed speakers failed to add more details to the Fed plans for how it is going to reach an average 2% inflation, the U.S. Dollar could move higher like it did after last week’s Fed monetary policy announcements.

Fed’s Powell Says Central Bank Committed to Using All Tools to Help Recovery

The Federal Reserve remains committed to using all the tools at its disposal to help the U.S. economy recovery from the blow delivered by the coronavirus pandemic, Chair Jerome Powell said on Monday.

“We remain committed to using our tools to do what we can, for as long as it takes, to ensure that the recovery will be as strong as possible, and to limit lasting damage to the economy.”

Powell said in remarks released ahead of Tuesday’s appearance before the House of Representatives Financial Services Committee, the first of three days of testimony to Congress this week.

Powell’s summation of the “marked improvement” in the economic landscape largely repeated what he said last week after the Fed’s latest policy meeting, at which policymakers promised to keep interest rates pinned at zero until the economy reaches full employment and inflation is on track to modestly overshoot the central bank’s 2% target, Reuters reported.

Fed’s Bullard Says U.S. Has Already Delivered Enough Fiscal Aid

Federal Reserve Bank of St. Louis President James Bullard said the U.S. economy has enough momentum to continue its recovery from the coronavirus slump even if Congress fails to pass additional taxpayer support, Bloomberg reported.

“I don’t think there is as much an imperative about a new fiscal package as there might have been” in July or August, Bullard said Monday in a Bloomberg Television interview with Kathleen Hays. “It seems like, at least in some broad macroeconomic type of calculation, we have enough resources to cover this.”

“We might be able to sustain a recovery through this,” he said. “I’m hopeful we still have enough in the pipeline to push us through, get the growth going in the second half of the year. That certainly seems to be what’s happening in the third quarter. I think that will continue in the fourth quarter and the first part of next year.”

Bullard’s Views Differ from Powell’s Outlook

Bullard’s view contrasts with Fed Chair Jerome Powell, who has urged additional fiscal aid and sometimes put the message in dire terms, as well as other Fed officials. In congressional testimony to be delivered Tuesday, Powell said the U.S. faces a long recovery with a high degree of uncertainty surrounding the pandemic, Bloomberg reported.

The U.S. economy may shrink 3%-4% this year, which is less than half of what was expected early during the crisis, so the $3 trillion in pandemic aid passed by Congress as well as he Fed’s easy monetary policy stance should help support growth during the recovery, Bullard said.

For a look at all of today’s economic events, check out our economic calendar.

Fed Statement, Projections, Powell’s Comments Produce Mixed Reactions by Traders

At the end of the trading day, the market’s reaction to the series of Fed announcements was mixed. Stocks initially surged after the Fed released its post-meeting statement and its latest economic forecast, showing it will keep interest rates at zero at least through 2023, as expected.

Stocks gave up their gains as Fed Chairman Jerome Powell briefed the media, and described the Fed’s guidance as strong and “powerful.”

Treasury yields moved slightly higher after Powell said the Fed plans to keep its asset purchases at current levels for now. Some bond pros have been expecting the Fed to increase Treasury purchases, and Powell did not commit to that. The 10-year Treasury yield rose to 0.695%.

“We’re going to continue to monitor developments, and we’re prepared to adjust our plans as appropriate,” Powell said.

Some Experts Find Fed’s Guidance Dovish

It was the Fed’s guidance that the markets found dovish. In the Fed’s latest projections, core inflation is expected to stay low and not reach the Fed’s 2% target until 2023. At the same time, the job market is expected to improve to the point where unemployment is at 4% in 2023, below the longer run rate of 4.1%.

“This is dovish – lower rates for longer, higher equities, weaker dollar,” said Jon Hill, senior fixed income strategist at BMO. “The Fed is saying we’re not hiking in 2023, maybe in 2024…What they’re saying is these are our goals. We expect to have just barely met them and even then, they’re not raising rates.”

Others Think Powell May Have Undercut the Dovish Tone

AB Economist Eric Winograd said Powell may have undercut the dovish message he was sending.

“He noted that targeting an inflation overshoot for ‘some time’ as the statement says, means that they are not targeting a ‘sustained’ overshoot. So how long is ‘some time’ if it isn’t sustained?” Winograd said. “That imprecision is a problem that the committee is going to have to solve to reap the full benefits of the framework shift. It’s not a coincidence that the stock market, which had been in positive territory, flipped negative after the chair’s comments.”

Forex Markets – Dollar Strong on New Projections

The commodity-linked Australian and New Zealand Dollars finished mixed after retreating from their highs. The Euro fell hard after reversing earlier gains. The Japanese Yen, however, spiked higher.

Overall, the U.S. Dollar gained ground after the Fed announcements in a mostly two-sided trade. Although the Federal Reserve kept interest rates pinned near zero, which is bearish for the U.S. Dollar, policymakers also said they expect the U.S. economy from the coronavirus to accelerate with unemployment falling faster than the central bank expected in June.

In new economic projections, Fed policymakers at the median see economic growth dropping by 3.7% this year, an improvement from the 6.5% drop projected in June. It was this upgrade to the economic outlook that supported the U.S. Dollar.

For a look at all of today’s economic events, check out our economic calendar.

Quick Fed Analysis: FOMC Sees Rates Near Zero Until Inflation Hovers Over 2%

The U.S. Federal Reserve released its monetary policy statement at 18:00 GMT on Wednesday. Central bank policymakers kept interest rates pinned near zero and promised to keep them there until inflation is on track to ‘moderately exceed” the U.S. central bank’s 2% inflation target “for some time.”

The change in guidance was in line with the Fed’s monetary policy shift announced last month that is aimed to offset years of weak inflation and allow the economy to keep adding jobs for as long as possible.

This week’s Federal Open Market Committee (FOMC) meeting was the last before the U.S. Presidential election in November and contained a multitude of information that affects both the short-term and long-term aspects of the economy as well as across all markets from commodities to stocks.

Here are some of the key points derived from the Fed’s monetary policy statement and its latest economic forecasts.

  • The U.S. Federal Reserve maintained key overnight interest rates in target range of zero to 0.25 percent.
  • The median forecast of Fed policymakers is for rates to stay near zero through 2023.
  • The Fed also saw GDP declining in 2020 less than the previous forecast but growing more slowly in 2021 and 2022 than previously forecast.
  • The Fed also expects to maintain the current Fed Funds rate until the labor market has reached levels consistent with assessments of maximum employment, and inflation has risen to 2% and on track to exceed that for some time.
  • The Fed repeated its commitment to using its full range of tools to support the U.S. economy.
  • Additionally, the Fed said it seeks to achieve maximum employment and inflation at a rate of 2% over the long-run.
  • The Fed also said it will aim to achieve inflation moderately above 2% for some time so it averages 2%.
  • The Fed stated that it will maintain Treasury and agency-backed securities purchases at least at the current pace to help foster accommodative financial conditions.
  • Fed members voted 8-2 in favor of the current policy.

Key Points of Powell’s Post-Meeting Press Conference

  • When asked about inflation, Federal Reserve Chairman Jerome Powell said guidance from policymakers shows confidence in its ability to reach its 2% goal.
  • Powell also said one would expect the pace of improvement to be the fastest in the early stages of recovery.
  • When asked about the fiscal policy response, Powell said there’s been a really positive effect but more is likely to be needed.
  • When asked about the possibility of a delayed arrival of a coronavirus vaccine, Powell says we’re learning to live with COVID-19 and engage in economic activity.
  • Finally, Powell admitted that there are still areas of the economy that are going to really struggle until we have a vaccine that is in wide usage.

For a look at all of today’s economic events, check out our economic calendar.

Price of Gold Fundamental Daily Forecast – Consolidating Ahead of Treasury Auctions, ECB Decisions

Gold futures are trading flat-to-higher on Tuesday, basically mirroring the price action in the Treasury futures market, the U.S. Dollar Index and the Euro. These three markets are likely to have the biggest influence on prices this week

At 07:10 GMT, December Comex gold futures are trading $1937.40, up $2.80 or +0.14%.

Earlier in the session, gold prices eased, weighed down by a stronger U.S. Dollar, but losses were limited by growing fears over the global economic recovery from the coronavirus crisis. A further elevation of cases could prompt governments and central banks to inject more fiscal and monetary stimulus into their respective economies, underpinning gold prices.

Hopes around a swift economic recovery faded after data showed that Japan’s economy shrank more than initially estimated in the second quarter as capital expenditure took a hit from the pandemic.

Gold Traders Cautious Ahead of Treasury Auctions

Following Friday’s spike higher in U.S. Treasury yields, gold traders may be expressing a little caution ahead of this week’s Treasury auctions. Gold and Treasury yields are very closely linked. Since gold is a non-yielding asset, it tends to weaken when U.S. Treasury yields rise.

However, in this current environment, the relationship between interest rates and gold is a little skewed with the Fed making moves to hold interest rates near historical levels for years, and Treasury investors seeking better yields in the open market.

Last week’s action in the Treasuries was a good example of how confusing the direction of rates could be for gold traders over the short-run.

On Thursday, U.S. Treasury yields fell after a big decline in U.S. stock indexes made safe-haven Treasuries more appealing to investors. Gold hardly moved.

On Friday, U.S. Treasury yields spiked higher, propelled by August employment data and worries about an upcoming massive Treasury auction that could further support higher yields.

The U.S. Treasury will sell $50 billion of three-year notes on Tuesday, $35 billion of 10-year notes on Wednesday and $23 billion of 30-year bonds on Thursday.

European Central Bank Meeting Another Concern for Gold Traders

On Thursday, the ECB will meet to discuss policy. Although no one expects any major moves, policymakers are expected to make comments about inflation after a report last week showed that Euro Zone inflation slipped into negative territory.

This is important to gold traders because the news will affect the Euro and the Euro is essentially the U.S. Dollar Index because of its 57% weighting in the basket.

Gold traders like to follow the dollar index so any major move in the Euro in reaction to an ECB comment could move prices. Not only are ECB policymakers concerned about Euro Zone inflation, but some also expressed some concerns about the value of the Euro. In fact, these comments encouraged long investors to book profits in the Euro last week.

Short-Term Outlook

Gold prices could consolidate for a few days this week until investors get some direction from Treasury yields and the U.S. Dollar. The direction of yields is likely to be dictated somewhat by U.S. inflation data and the results of the auction. Meanwhile, on Thursday, ECB comments on inflation or the value of the Euro should move the dollar index. Its direction should be a factor in determining the movement in gold prices later in the week.

For a look at all of today’s economic events, check out our economic calendar.

Goldman Sachs Sees Low Rates Until 2025; Clarida Says Fed to Resume Discussion of Next Policy Steps

The news was light on Monday which gave investors more time to try to figure out what the Fed is trying to do after announcing a major policy shift last week. On Thursday, Federal Reserve Chairman Jerome Powell unveiled major changes to the way it plans to manage inflation and unemployment. While not revealing too much detail on how they plan to accomplish this, most market participants agree that the move is likely to keep interest rates at or near historical lows for several years.

Goldman Sachs:  Fed Won’t Raise Rates Until 2025

New Analysis from Goldman Sachs supports the bank’s earlier prediction that the central bank will keep rates low until about 2025.

According to Forbes, these are the key facts Goldman Sachs used to reach their conclusion.

“Last week, Fed Chair Jerome Powell announced that the Fed will now seek to target inflation that averages 2% over time, meaning that it can allow inflation to surpass that level during periods of economic recovery.”

“The Fed hopes that the change will help boost the labor market by keeping rates lower for longer and thus providing additional support for the economy.”

“Keeping rates at their current levels means that borrowing costs for both businesses and consumers will stay lower for longer – it will be cheaper for small businesses to get loans, for instance, and cheaper to buy a home with a mortgage.”

“Researchers from Goldman Sachs found that an aggressive average inflation targeting policy would keep rates very low for a long period of time and would return inflation to its 2% baseline in about a decade.”

Fed to Resume Discussion of Next Policy Steps, Clarida Says

With a new policy framework in place, the Federal Reserve will turn to debating possible next steps in the U.S. central bank’s fight against the economic fallout of the coronavirus pandemic, Fed Vice Chair Richard Clarida said on Monday.

That discussion is expected to include possible promises by the Fed to link interest rate decisions directly to a return to full employment, and the possible expansion of its monthly asset purchases to further boost the economy.

“Now that we have concluded the review, I imagine we will be returning to a discussion of potentially refining guidance and our balance sheet communication, but I don’t want to prejudge where that would end up,” Clarida said during an event organized by the Peterson Institute for International Economics in Washington.

Analysts have said the new strategy lacks details and begs the question of what the Fed will do to support its new approach – and in particular when the central bank might announce expected increases in its bond purchases or flesh out the time period used to assess “average” inflation.

Clarida said that latter decision may wait until the economy recovers more.

“I would expect as the economy recovers and as we approach our dual mandate goals there will be further communication,” about the Fed’s plans, Clarida said in a question-and-answer session after he spoke via a webcast at Monday’s event.

For a look at all of today’s economic events, check out our economic calendar.

Price of Gold Fundamental Daily Forecast – Could Spike Higher if Fed Changes Approach to Inflation

Gold futures are edging lower early Wednesday despite weaker Treasury yields and a slightly weaker U.S. Dollar, ahead of the release of the minutes from the July Federal Reserve monetary policy meeting that could set the tone later in the session.

At 06:14 GMT, December Comex gold is trading $1997.40, down $15.70 or -0.78%.

Currently, gold is straddling a key technical area at $1981.70 to $2007.10 that could determine the near-term direction of the market.

U.S. Treasury Yields

U.S. Treasury yields were lower Wednesday morning as investors awaited the release of the latest Federal Reserve minutes, while monitoring developments on a new coronavirus relief bill in Washington.

Stimulus Package

U.S. Treasury Secretary Steven Mnuchin on Tuesday criticized Democratic counterparts for what he characterized as unwillingness to discuss a smaller coronavirus stimulus agreement. However, Politico reported that House Speaker Nancy Pelosi has voiced the possibility of cutting some demands to secure a deal.

US-China Tensions

President Donald Trump said on Tuesday that he had canceled further impending trade talks with Beijing over its response to the coronavirus pandemic, which has now infected more than 5.4 million Americans.

Daily Forecast

The direction of gold prices today will continue to be determined by U.S. Treasury yields and the U.S. Dollar. Both are likely to be influenced today by the message delivered by the Fed in the minutes from its July monetary policy meeting.

The FOMC’s last meeting minutes will be released at 18:00 GMT, offering an insight into the central bank’s deliberating process as it looks to shore up the economy in the wake of the pandemic.

Most analysts agree the Fed is not expected to indicate any new monetary stimulus initiatives in the minutes, however, investors will be watching for any change to the Fed’s approach to inflation that could be negative for the dollar. This could spike dollar-denominated gold higher.

For a look at all of today’s economic events, check out our economic calendar.

Price of Gold Fundamental Daily Forecast – Market Clears Key Resistance on Back of Low Yields, Weak Dollar

Gold futures are trading higher on Tuesday shortly before the regular session opening on the back of a weaker U.S. Dollar. The greenback is being pressured by falling Treasury yields, weaker than expected economic data and the dampening of its appeal as a safe-haven asset. Speculative buying ahead of the release of the U.S. Federal Reserve’s last policy meeting on Wednesday could also be providing support.

At 12:18 GMT, December Comex gold is trading $2015.20, up $16.50 or +0.83%.

Weak U.S. Dollar Supportive

The U.S. Dollar is trading lower against a basket of currencies on Tuesday for a fifth consecutive trading day, rapidly approaching its lowest level in two years. Low yields and bleak economic data in the United States are driving investors out of the greenback and into higher-yielding currencies and into currencies of countries that are expected to outperform the U.S. economy.

On Monday, a worse than expected reading of the New York Fed’s Empire State business conditions index in August also helped traders stick to their bearish convictions for the currency.

Meanwhile, net bearish bets on the greenback rose to their largest since May 2011 last week, and spot trade in recent days suggests the position has only grown further since.

Real money and leveraged investors preferred to express their negative view on the dollar via the most traded currency pair in the world – Euro/Dollar – pushing Euro longs to a new record high in the week to August 11, latest CFTC data showed.

US Treasury Yields Edge Lower

U.S. government debt yields were lower Tuesday morning, as investors monitored a fresh batch of economic data and Treasury auctions.

Ahead of the start of regular session trading, market participants are largely focused on simmering U.S.-China tensions and ongoing concerns about the economic impact of the coronavirus pandemic.

The U.S. tightened restrictions on China’s Huawei on Monday, seeking to make it more difficult for the tech giant to obtain critical components.

Meanwhile, U.S. lawmakers remain locked in a stalemate over a potential new coronavirus stimulus deal. Democrats and Republicans are holding their respective presidential nominating conventions starting this week.

On the data front, housing starts for July, building permits for July and business leaders survey figures for August will all be released at 12:30 GMT. Additionally, the U.S. Treasury will auction $30 billion of 119-day bills and $30 billion of 42-day bills on Tuesday.

Daily Forecast

Gold has recovered a key short-term area on the daily chart, which is controlling the near-term direction of the market. Holding above $2007.10 to $1981.70 will help sustain the upside bias. The catalysts for a rally are in place – low yields, weak dollar – so we expect the market to be supported.

If there is a surprise, it will likely occur late in the session as buyers may decide to take profits and square positions ahead of Wednesday’s Fed minutes. The first sign of weakness will be a break under $2007.10. Buyers may panic a little if $1981.70 fails as support.

For a look at all of today’s economic events, check out our economic calendar.

Price of Gold Fundamental Weekly Forecast – Short-Term Traders Locked-in on Treasury Yields

Gold futures posted their worst performance since March last week as an uptick in U.S. Treasury yields reduced demand for the non-yielding asset. The stalemate over a U.S. stimulus bill to help the coronavirus-hit economy also dampened gold’s appeal as an investment.

Despite the size of the break last week, the selling was orderly and did not suggest investors had shifted into panic mode. This is because for all intents and purposes, investors had already accepted the possibility that gold prices had gone a little parabolic recently and may have rallied a little too far, to fast in relation to the fundamentals.

Last week, December Comex gold futures settled at $1949.80, down $78.20 or -3.86%.

When the dust from the steep decline cleared, prices consolidated as investors regrouped while reassessing the trading environment.

Longer-term, the market remains well-supported as the Fed is widely expected to hold rates near zero for several years. Over the short-run, however, the market seems poised to take a pause, primarily due to firmer U.S. Treasury yields.

It’s important to note that the term “interest rates” is thrown around a lot when in fact there is the Federal Funds rate, which remains at 0 to 0.25% and then there are Treasury yields. I think a lot of longs got caught last week watching the Fed Funds rate, while Treasury yields creeped up on them.

Benchmark U.S. Treasury yields surged to seven-week highs last week after the Treasury sold a record amount of 30-year bonds to weak demand. In this sale, the Treasury moved $26 billion in bonds, up from $22 billion at its last quarterly refunding in May. The debt sold at a high yield of 1.406%, around three basis points higher than were the debt traded before the sale.

The Treasury last week increased auction sizes across the curve and said that it plans to continue to shift more of its funding to longer-dated debt in coming quarters as it finances measures to offset the impact of the coronavirus epidemic.

Weekly Forecast

Treasury yields are going to continue to dictate the direction of the gold market this week. Since the Treasury auction is over, traders are going to watch to see if yields start drifting lower again or consolidate.

If Treasury yields start to creep lower then look for gold prices to firm. Gold could trade steady to lower if rates continue to drift higher.

Over the long-run, conditions are still ripe for further price appreciation. Congress is not expected to negotiate a stimulus package until they return from their summer recess around September 7, and traders will start taking the election more seriously after Labor Day.

These two factors will influence gold prices but only to the extent that they influence Treasury yields. For example, a flight to safety rally into Treasury bonds will lower rates and drive up gold. Don’t just trade the headline. Make sure that yields move.

Don’t be surprised if gold move sideways over the next three weeks. This will be the set-up for the return of volatility after September 7.

For a look at all of today’s economic events, check out our economic calendar.

Price of Gold Fundamental Daily Forecast – Rangebound Due to Lack of Clarity from Treasury Yields, US Dollar

Gold futures are edging lower on Friday despite a dip in U.S. Treasury yields. The market rallied on Thursday even though yields rose sharply. This suggests traders are out of sync with the interest rates, at least temporarily.

This is understandable because the steep sell-off this week probably has many of the smaller players still licking their wounds. There were likely some heavy losses this week from traders who bought near the highs so it may take a few days to move some money around before they get back on the horse.

At 08:45 GMT, Comex gold futures are trading $1955.10, down $15.30 or -0.78%.

The price action also suggests that gold traders are a little more locked in on the U.S. Dollar this week. After a promising start, the greenback has drifted mostly sideways to lower, and is in a position to post a slightly lower close for the week.

Meanwhile, gold has mirrored the move in the dollar. With the dollar’s early spike to the upside, gold plunged, but when the greenback started to flatten out, gold traded higher to flat.

The price action also suggests that short-term gold traders may be a little confused about how to play the stalemate in Washington. Many were betting on another round of fiscal stimulus by now from Washington, but with Congress taking a break until the U.S. Labor Day holiday, it looks as if there may not be a federal government aid package until at least the first week in September.

Meanwhile, the longer-term bullish outlook remains intact. Massive money-printing by central banks, an ultra-low interest rate environment and worries over the economic fallout from mounting coronavirus cases have helped gold rise more than 27% so far in 2020.

Additionally, the Fed’s recent gloomy assessment for the economy is very supportive for gold. Recently, policymakers warned U.S. growth would be muted until the coronavirus was contained.

Short-Term Outlook

We said earlier in the week that gold is fragile over the short-run and especially this week because of the massive U.S. Treasury auction. With new supply coming in, interest rates tend to rise as notes and bonds fall.

Thursday’s Treasury bond sale was met with weak demand, Reuters reported, which also pushed yields higher. Despite this development, gold showed little reaction to the news with traders zeroing in on the movement in the U.S. Dollar.

The 10-year Treasury note hit its highest level since June 24, while the 30-year reached its highest level since July 7. Also helping to boost rates was a U.S. jobs report which showed that the number of people claiming unemployment benefits was 963,000 last week. It’s the first time the figure has fallen below 1 million since March, when the coronavirus pandemic took hold in the U.S.

Over the short-run, gold is vulnerable to the downside if Treasury yields continue to trend higher. Improving labor market conditions could be the catalyst behind such a move. Additionally, rising rates could also boost the U.S. Dollar, which would be another bearish catalyst for gold.

Gold could also become rangebound over the near-term if rates stabilize, or move higher and the U.S. Dollar remains weak.

We’ve entered a difficult period where the short-term direction of Treasury yields and the dollar is unclear, and this may be reflected in a sideways gold trade.

For a look at all of today’s economic events, check out our economic calendar.

Yields Jump, Gold Falls Ahead of Record 10-Year Treasury Supply

Dollar-denominated commodities and emerging Asian currencies continued to weaken against a resurgent U.S. Dollar on Wednesday. After being favored for its safe-haven appeal earlier in the year, the greenback has struggled this year as the U.S. Federal Reserve pumped billions of additional dollars into the financial system and COVID-19 cases surged.

That trend has reversed somewhat in the past week and a jump in U.S. Treasury yields overnight, ahead of a record $38 billion bond auction later on Wednesday, gave the currency another boost across the board.

At 05:51 GMT, September U.S. Dollar Index futures are trading 93.850, up 0.250 or +0.27%.

Gold Falls Below $1900 as US Dollar, Yields Rise

Did the U.S. and China suddenly resolve their differences? Did the Coronavirus go away? No, then why is gold going down? It’s because investors who bought and analysts who recommended buying gold because of its safe-haven appeal during times of geopolitical turmoil are getting smoked. It’s because they don’t seem to understand that gold prices are controlled by interest rates.

At 05:59 GMT, December Comex gold futures are at $1892.10, down $54.20 or -2.78%.

Gold is an investment and it’s going to keep going down until it reaches a value area that is attractive enough to bring in the buyers. Of course, it’s going to need some help from Treasury yields, and right now rising yields are controlling the show.

It does help when a market gets a little too pricey, the Commitment of Traders gets a little too overbought, analysts say things like gold won’t rally below $2000 because of tensions between the U.S. and China, and major investment firms make predictions like $3000 or $4000 gold prices.

Those are headlines…don’t trade gold using headlines. Use Treasury yields as your guide.

Treasury Yields Up, Dollar Up, Gold Down

A jump in U.S. Treasury yields helped the dollar extend its winning streak, making gold more expensive for those holding other currencies. Higher yields also increase the opportunity cost of holding non-yielding gold.

U.S. Treasury yields jumped to one-month highs on Tuesday, a day before the Treasury will sell its largest-ever amount of 10-year notes, even as stocks reversed earlier gains that had them on track for record highs.

The Treasury last week increased auction sizes across the curve and said it plans to continue to shift more of its funding to longer-dated debt in coming quarters as it finances measures to offset the impact of the coronavirus pandemic.

It will sell a record $38 billion in 10-year notes on Wednesday and $26 billion in 30-year bonds on Thursday.

Any time you get a huge amount of supply, especially long-dated securities there is probably a reaction to sell the Treasury market before the debt comes. This drives up yields, making the dollar a more attractive asset and gold a less-desirable investment.

That being said, gold could start to climb again when the excitement from the auctions settles. Hopefully, by then it will have reached a value area.

For a look at all of today’s economic events, check out our economic calendar.

US Stock Market: Multiple States Investigate Apple, Disney Delays Major Film Releases, Fear Gauge Rises

Thursday’s U.S. stock market losses led to investors seeking protection in options and Treasurys. This drove the Cboe Volatility Index (VIX) – seen by Wall Street as the market’s best “fear gauge” – to 26 and benchmark 10-year Treasury yields to 0.57%.

Some of the volatility was fueled late in the session by extreme “whipsaw” action. The wild, two-sided trade that steepened the late session selloff was triggered by a report from a watchdog group that said Apple Inc faces consumer protection investigations in multiple states. Apple traded 4.5% lower after the report.

Apple Faces Deceptive Trade Practices Probe by Multiple U.S. States:  Axios

Multiple U.S. states are investigating Apple Inc for potentially deceiving consumers, according to a March document obtained by a tech watchdog group, Reuters reported.

The Texas attorney general may sue Apple for violating the state’s deceptive trade practices law in connection with the multi-state investigation, according to the document, which was obtained by the Tech Transparency Project.

The document did not provide additional details.

The office of the Texas attorney general declined to comment. Apple did not immediately respond to a Reuters request for comment.

Apple has faced class-action lawsuits from consumers alleging that it deceived them about slowing the performance of iPhones with aging batteries. The company agreed to pay up to $500 million to settle one such lawsuit earlier this year.

Apple is also facing lawsuits alleging that it knew and concealed how the “butterfly” keyboards on its MacBook laptops were prone to failure.

Treasury Yields Fall Slightly After Jobless Claims Come in Worse Than Expected

Treasury yields dipped on Thursday after data showed U.S. jobless claims rose more than expected last week. The yield on the benchmark 10-year Treasury note fell one basis point to 0.584% and the yield on the 30-year Treasury bond were also lower at 1.274%. Yields more inversely to prices.

US Companies Making Headlines After Thursday’s Bell

Intel’s stock dropped 8% in extended trading after the company offered disappointing third-quarter guidance. Intel released its second quarter earnings, beating predictions of analysts surveyed by Refinitiv.

After Intel said the company’s 7mm-based CPU product timing is delayed, shares of Advanced Micro Devices climbed 7% in after hours.

Moderna’s stock dropped 2% in extended trading after falling 9.49% earlier in the day. The drop comes after the U.S. Patent and Trademark Office ruled Moderna does not have a claim to a patent held by a rival company.

The ruling could potentially delay Moderna’s race to produce a coronavirus vaccine. Shares of BioNTech jumped 2% while Novavax’s stock fell 1% in after hours.

Disney’s stock fell 1% after the closing bell. The company announced Thursday afternoon that its movie “Mulan” is delayed indefinitely and all Star Wars films and Avatar sequels have been pushed back a year due to theater closures and production shutdowns spurred by the coronavirus pandemic.

For a look at all of today’s economic events, check out our economic calendar.

Price of Gold Fundamental Daily Forecast – Steady-to-Lower but Could Be Vulnerable to Stronger US Dollar

Gold futures are trading steady-to-lower at the U.S. mid-session on Thursday as investors continue to assess the impact of mounting coronavirus cases and worsening U.S.-China relations against the backdrop of firm demand for higher-risk assets amid growing optimism of a swift economic recovery from the crisis.

At 15:16 GMT, August Comex gold is trading $1806.50, down $7.30 or -0.40%.

Falling Treasury yields, lower stocks and a weaker U.S. Dollar could be enough to send gold prices higher later in the session, but right now, we’ll have to be happy with these three factors limiting losses.

Our key indicator is Treasury yields. When they fall, gold tends to weaken. Although this may not be the case at the U.S. mid-session, it’s too reliable an influence to ignore. Obviously, gold bulls would like to see the government and the Fed announce more stimulus measures, but that’s not likely to happen today. However, falling rates are indicative that something may be coming in those areas – at least investors appear to be indicating the need for additional help.

Wall Street Falls as Virus Fears Eclipse Upbeat Retail Report

U.S. stocks are down on Thursday with the S&P 500 retreating from a five-week high as concerns about the economic toll from another round of shutdowns across the United States offset data showing upbeat domestic retail sales in June.

Declining issues are outnumbering advancers 3.09-to-1 on the NYSE and 3.3-to-1 on the NASDAQ.

US Economic Data Mixed

The Commerce Department’s report showed retail sales jumped 7.5% last month compared with economists’ forecast of 5%, signaling the economy was continuing to limp out of a coronavirus-driven slump.

Another report from the Labor Department on Thursday showed weekly jobless claims fell to 1.30 million in the week-ended July 11, down slightly from the previous week but remain roughly double their highest point during the global financial crisis.

One emerging concern is in the labor market. Millions are set to lose their unemployment checks on July 31 when the government stops paying an additional $600 per week to jobless self-employed people, gig workers and contractors who do not qualify for regular state unemployment benefits.

Treasury Yields Edge Lower

U.S. government debt prices were slightly higher Thursday as concerns over rising coronavirus cases stateside and U.S.-China tensions tempered optimism arising from progress toward a vaccine. Yields were also pressured by the mixed economic news which may be a sign that investors are looking for additional stimulus from the government or Fed.

Dollar Putting in Mixed Performance

The U.S. Dollar strengthened early Thursday before turning negative for the session. The price action in gold appear to be mirroring the movement of the dollar.

The catalyst behind the earlier strength was poor Chinese retail sales as investors chose to focus on consumer spending rather than better-than-expected overall growth in the economy.

Short-Term Outlook

We’re seeing a mixed performance in the gold market today, but when the dust finally clears, we could find gold under pressure due to a stronger U.S. Dollar, which is getting a safe-haven bid from escalating U.S.-China relations.

However, losses could be limited by weaker equities and Treasury yields.

For a look at all of today’s economic events, check out our economic calendar.

Should Gold Bulls Celebrate the Persistent ZIRP?

Yesterday, the Fed issued the statement from the FOMC meeting on June 9-10. The statement is little changed from the April edition. Nevertheless, there are two important differences. First, the members of the Committee have acknowledged the improvement in the economic situation since April, as they wrote that “financial conditions have improved, in part reflecting policy measures to support the economy and the flow of credit to U.S. households and businesses.” Moreover, according to new wording, the virus and the measures taken to protect public health “have induced” (instead of “are inducing” in April) sharp declines in economic activity and a surge in job losses.

Second, the Fed used a subtle forward guidance, reassuring the market participants that the quantitative easing will not end or even be tampered with anytime soon. Perhaps to avoid taper tantrum, the FOMC wrote:

To support the flow of credit to households and businesses, over coming months the Federal Reserve will increase its holdings of Treasury securities and agency residential and commercial mortgage-backed securities at least at the current pace to sustain smooth market functioning, thereby fostering effective transmission of monetary policy to broader financial conditions.

What does it mean for the gold market? On the one hand, the Fed’s balance sheet is already massive, as the chart below shows. Indeed, the US central bank’s assets have surpassed $7 trillion in May and they are expected to rise even to around $10 trillion because of the coronavirus crisis. So, the Fed’s intention to increase it at least at the current pace should raise it even more, spurring worries about the unconventional monetary policy and possibly support gold prices.

On the other hand, the Fed’s forward guidance and end of steady tapering of asset purchases could reassure the Wall Street that the party of easy money and unlimited liquidity is going to last. The tap with cheap money will not be turned off anytime soon, or it can be even unscrewed wider – so, the FOMC statement could support risk appetite and risky assets at the expense of safe-haven assets such as gold. However, it seems that positive impact triumphed as gold prices rose yesterday amid the dovish FOMC statement, as the chart below shows.

June FOMC Projections and Gold

The FOMC issued yesterday not only the statement of its monetary policy, but also its fresh economic projections. Not surprisingly, all projections are much more pessimistic compared to December. The GDP growth and inflation will be lower, while the unemployment rate higher, as the table below shows.

For example, the FOMC expects that the GDP will decrease 6.5 percent in 2020, increase 5 percent in 2021 and 3.5 percent in 2022, compared to positive 2 percent, 1.9 percent and 1.8 percent expected in December. What is important here, is that although the Fed sees recovery next year (which is normal, given the low base in 2020), the projections do not paint the V-shaped recovery, as the GDP will return to its pre-pandemic level only in 2022. As Powell said during his press conference “We all want to get back to normal, but a full recovery is unlikely to occur until people are confident that it is safe to reengage in a broad range of activities.”

This is rather good news for gold.

The unemployment rate is expected to be 9.3 percent in 2020, 6.5 percent next year and 5.5 percent in 2021, versus 3.5-3.7 percent range seen in December projections. These are also quite positive projections for gold prices, as the unemployment rate is not expected to even return to its pre-pandemic level.

When it comes to PCE inflation, the FOMC sees muted inflation in 2020 (0.8 percent rate instead of 1.9 percent projected in December), and rebound in next years to 1.6 and 1.7 percent (versus 2 percent in both years forecasted in December). Lower inflation rates could reduce the demand for gold as an inflation hedge. However, the FOMC projects that inflation rates will be below its target, which will provide an excellent excuse for continuation of its dovish monetary policy, thus supporting gold prices.

Last but not least, the Fed sees its federal funds rate to remain near zero at least until 2022. As Powell said during the press conference “We’re not even thinking about raising rates,” Fed Chairman Jerome Powell told reporters.” This is also good news for gold from the fundamental point of view, which thrives under ZIRP and very low real interest rates.

If you enjoyed today’s free gold report, we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today. If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today!

For a look at all of today’s economic events, check out our economic calendar.

Arkadiusz Sieron, PhD
Sunshine Profits: Analysis. Care. Profits.

 

Fed Offers No Surprises, Gives Investors What They Wanted to Hear

Most major market strategists agreed that the Fed delivered what the market pretty much expected that it wouldn’t do anything. Its monetary policy statement didn’t contain any surprises and was straightforward, offering little details. But who really expected the Fed to give any details at this time. The impact of the coronavirus on the economy is still a breaking story so the forward guidance will come later. Right now, investors just wanted to hear that the Fed will hold rates near zero for some time and that policymakers have their backs.

Here is a sampling of comments from a few major market players.

“They’re essentially saying, with the (rate) projections, that we’re going to hold steady until 2022. When you look at the next page…back to the infamous ‘dot plot,’ it’s only two that are showing any kind of increase in 2022. So even then, (zero rates are) likely to last three-plus years,” said Michael Skordeles, U.S. Macro Strategist, Truist/Suntrust Advisory Services, Atlanta.

Jon Hill, Interest Rate Strategist, BMO Capital Markets, New York said, “The kneejerk reaction is going to be very hard to dissect because generally the Fed’s signals were in line with expectations. They acknowledged that unemployment’s going to be high, inflation is going to be low and they are going to keep interest rates very low for at least the next two years. That should be positive for stocks. And they also stopped tapering their quantitative easing program.”

“As expected, with regard to rates and the like. Did they do yield curve control – they didn’t. We were struggling with whether they would go there or not in terms of tool chest. Obviously they retain the option to go there but maybe part of it is they are figuring out the full implications of it. And maybe part of this is that normally they are in the business of predicting economics and they do a lot of that, but part of yield curve control and part of forward guidance is forward and the pandemic part so do they really want to tether themselves to the mast as mush it might imply with yield curve control. But more is better than less in their view,” said Bruce Monrad, Chairman and Portfolio Manager, Northeast Investors Trust, Boston.

Summary

In my opinion, the Fed did what it had to do given the economic data it has at this time. It is probably too early for policymakers to give forward guidance, which the Fed avoided. Instead it remained flexible.

As new data about the impact of COVID-19 on the economy becomes available the Fed could become more targeted with its stimulus as well as offer more specific guidance on employment and inflation. Policymakers need to take the time to assess the situation and make its tweaks further down the road.

I don’t see anything in the Fed’s statement that could change the status quo in the financial markets. Rates are expected to remain low until the end of 2022 so Treasurys are likely to remain elevated. Low yields are supportive for stocks. In the meantime, the Dollar is likely to remain capped or under pressure, while gold is expected to remain underpinned.

For a look at all of today’s economic events, check out our economic calendar.

Yields Tumble, Gold Moves Higher, Stocks Mixed After Fed Keeps Rates at Zero

The initial reaction to the Federal Reserve’s interest rate and monetary policy decisions released at 18:00 GMT on Wednesday was mixed with stocks weakening slightly, gold nudging higher and the U.S. Dollar weakening against a basket of currencies. More importantly, June U.S. Treasury futures rose which means Treasury yields fell.

Traders are now awaiting the start of Federal Reserve Chairman Jerome Powell’s press conference and the release of policymaker economic forecasts. This should shed more light on the central bank’s view of the economy and its need for further stimulus.

Traders expect to see more volatility into today’s close with even more reaction on Thursday as foreign market traders assess the Fed’s conclusions.

Instant Reaction:  Fed Sees GDP Falling 6.5% in 2020, Keeps Rates at Zero

The U.S. Federal Reserve on Wednesday signaled years of extraordinary support for an economy facing a torturous slog back from the coronavirus pandemic, with policymakers projecting a 6.5% decline in gross domestic product this year and a 9.3% unemployment rate at year’s end, Reuters reported.

In the first economic protections of the pandemic era, U.S. central bank policymakers put into numbers what has been an emerging narrative:  that the measures put in place to battle a health crisis will echo through the economy for years to come rather than be quickly reversed as commerce reopens, according to Reuters.

Federal Reserve:  No Short-Term Rate Hike Through End of 2022

In its policy statement, the Fed once again pledged to keep interest rates near zero until the economy “is on track” for a full recovery. The Fed also left unchanged its long-range forecasts for GDP, unemployment and PCE inflation.

There were no dissents to that stance.

The Fed also said it doesn’t expect to lift short-term rates through the end of 2022. Additionally, the central bank said it will keep buying Treasurys and mortgage-backed securities, at least at the current pace.

In its statement, the Fed said again it would use its “full range of tools” to support the economy.

The Fed also noted that financial conditions had improved, in part because of the central bank’s actions. The Fed also repeated that the coronavirus pandemic poses “a considerable risk” to the outlook over the next 18 months or more.

Fed Chairman Powell on Tap

We’re looking for a possible two sided reaction in the markets as Fed Chair Powell begins his press conference at 19:30 GMT.

For a look at all of today’s economic events, check out our economic calendar.

US Non-Farm Payrolls Report in Focus – Look Beyond the Headlines Numbers for Valuable Data

Investors are anxiously awaiting the release on Friday of the U.S. Non-Farm Payrolls report from May, but that doesn’t mean we’ll see a major reaction to the news. Often times this report serves as dud. Furthermore, after an initial volatile reaction, the markets often settle into a range. Sometimes we don’t see the true reaction to the numbers until the following Monday after investors have digested the numbers over the week-end.

The report is actually comprised of three major sections:  the headline – Non-Farm Employment Change, the Unemployment Rate and Average Hourly Earnings.

A surprise in the report tends to trigger a volatile reaction. When two or more parts of the report contain surprises we often see a volatile two sided response. This usually occurs, for example, when the Non-Farm Employment Change is bullish, but Average Hourly Earnings are bearish.

We’re not expecting much volatility following the release of this report at 12:30 GMT on Friday because the data is stale. Investors are looking toward the future and putting less-weight on the past so this report could be shrugged off.

With parts of the country starting to open up, the focus for investors will be on how many employees have been hired back to their old jobs or have taken new jobs. Investors will also be interested in whether wages have held steady, or moved lower or higher. Furthermore, there will be some interest in what areas of the country are leading in rehiring, and what industries are doing the hiring.

Knowing what industries are hiring will give investors insight into what sectors of the stock market could recover factor. This data will be important to portfolio managers since they have to decide where to place money to get a good bang for the buck.

During the initial stages of the current rally, investors threw money at the stay-at-home businesses. Investor capital also flowed into cloud-related companies. Lately, we’ve been seeing money flow into those companies that are likely to benefit the most from the reopening of the economy like airlines, hotels, casinos and restaurants. Basically, the travel and leisure sector.

Friday’s Non-Farm Payrolls report is going to contain a lot of valuable information for the investor but you have to be willing to look beyond the headline numbers. The value in this report will come from the internals.

Investors shouldn’t be worrying about how many jobs were lost in May in my opinion, but about how many employees were hired back and in what sectors of the economy those hirings took place. If there is going to be a surprise in this report, it will be in this area of the report.

For a look at all of today’s economic events, check out our economic calendar.

Fed Members Not Looking for ‘Snap Back’ Economic Recovery Ahead of Powell Speech

Several Fed policymakers offered their assessments of the U.S. economy in the wake of the COVID-19 pandemic last week ahead of this week’s speech by Federal Reserve Chairman Jerome Powell on Wednesday.

With earnings season winding down and economies in several states reopening, investors are going to be looking for a new catalyst to drive the price action in the stock market. With that in mind, there will be added emphasis on Powell.

Powell speaks via webcast hosted by the Peterson Institute for International Economics at 13:00 GMT. He is expected to speak about the current issues facing the U.S. economy.

Fed’s Bostic:  Pace of U.S. Economic Recovery Will Vary Across Nation

The pace and shape of the U.S. economic recovery when the novel coronavirus outbreak abates is still highly uncertain and will vary across the country, Atlanta Federal Reserve President Raphael Bostic said on Tuesday.

There are lots of different possibilities,” Bostic said of the shape of any recovery, noting that in the first instance it hinges on stabilizing the infection rate.

“What I would say is right now it is very hard to know with any degree of uncertainty which ones are more or less likely. In many communities the “V” recovery is going to be very difficult to achieve,” Bostic said in a webinar, referring to a scenario where there is a swift economic bounce back.

“But across the country there has been a fair amount of diversity of experiences, diversity of vulnerability, and that will translate into diversity of recoveries.”

“Many of the essential jobs are low-paying jobs … we’re going to have to collectively think about how do we make sure that the people who have put themselves at risk through this are not just discarded once we get to the other side,” he said.

Fed’s Kashkari:  ‘It’s Devastating’ – The Actual Unemployment Rate Could Be as High as 24%.

Neel Kashkari, president of the Federal Reserve Bank of Minneapolis, said he thinks the jobs report likely understated the economic pain.

“I think the real number is probably around 23% or 24%,” Kashkari said. “It’s devastating.” On Friday, the U.S. Labor Department’s Non-Farm Payrolls reports showed a 14.7% unemployment rate.

Kashkari also said he doesn’t think the U.S. is bound to repeat what happened during the catastrophic economic downturn.

“I’m hopeful we can bounce back,” Kashkari said. “I’m optimistic, I don’t think we’re actually headed for another Great Depression.”

That’s because the policymakers in the 1930s did the wrong thing, according to Kashkari, which made the situation worse. Now, however, U.S. policymakers have been aggressive in their support for the economy.

“I think it’s becoming clear that we are in for a long, gradual recovery, which is unfortunate,” Kashkari said. “But I think we’re going to avert the depression scenario because policymakers are going to continue to be aggressive to fight that outcome.”

Fed’s Daily:  Sees Negative Growth in 2020, Slow Rebound for US Economy

Federal Reserve Bank of San Francisco President Mary Daly said she expects the U.S. economy to shrink this year with a recovery only getting under way next year.

“2020 as a whole is going to be a negative year, and then we’ll start to see a positive year in 2021,” Daily said Thursday in an interview with Bloomberg Television’s Michael McKee. With elevated uncertainty around the spread of the coronavirus, she said “that’s about as good as forecasting can get right now.”

“No one who I talk to is looking at a v-shaped recovery, they really think this will be gradual and it will take time to build confidence back up for both workers and consumers,” Daly said. “But they are more optimistic than you might think. They are ready to re-open and re-engage.”

“We are really looking at inflation being tepid not getting up to our 2% target for a while,” she said. The Fed will “do everything in our powers to achieve our dual-mandate goals and I think that gives market participants, households and businesses confidence.”