Ten hours separate us from the US Federal Reserve’s announcement of the results of its meeting held since yesterday, Tuesday, where the interest rate, the Federal Reserve Committee’s statement and the statement of economic expectations will be announced at nine o’clock Mecca time, followed by half an hour the press conference of Bank President Jerome Powell.
The importance of today’s meeting lies in the fact that it is the meeting that the markets have always bet on that the US Federal Reserve will give details of its plan to exit asset purchases and the start date. Since Jackson Hole, the focus has become on the September meeting, given that we are separated after only two meetings until the end of the year (November 3rd and December 15th).
Where the Fed is supposed to inform the market at least two months in advance of the details of its plan to reduce purchases, especially with the assurances of the President of the US Federal Reserve and members of the bank that the process of reducing purchases will begin before the end of this year.
The US Federal Reserve buys $120 billion in assets each month, including $80 billion in Treasuries and $40 billion in MBS mortgage-backed securities.
The economic data released after the last meeting of the Bank in August came in contrast, as the labor market data came below expectations, adding 235 thousand jobs only in August (expectations 720 thousand), while the annual inflation declined to 5.3% in August, in contrast, retail sales rose to 0.7%.
The most important question that the markets will ask hours before the outcome of the bank meeting is whether the US Federal Reserve will set a detailed date to start reducing bond purchases, or will the Fed continue to respond without clarity, and the response will be that it will happen soon or in the coming months without specifying a clear time frame. Determining a preferred date for the process of reducing bond purchases, whether it is in November or December, will support the rise of the US dollar and will be negative on stocks, metals and commodities, while the lack of clarity in presenting a detailed plan will negatively affect the US dollar, even temporarily, and stocks, metals and commodities will rise.
The economic outlook report issued by the Federal Reserve Committee, which is issued every three months, will also be announced today, as the markets will focus on the expectations of members to raise interest rates, especially after there were seven members of policy makers in the last statement in July, who believed that interest rates may rise by one time.
At least one in the next year and if we witness an increase in the number of members who see a rise in the next year, the US dollar will rise and vice versa.
Financial markets are trading stable this morning, Wednesday, hours before the statement, as the general index of the US dollar is trading at 93.22 levels, close to the opening levels.
The yellow metal is trading at levels of 1778 dollars per ounce, an increase of about 0.25%, while the yield on the US Treasury bonds for the ten years rises by 0.41% at 1.329 levels.
The US futures, for today’s session, is on the rise, as the Dow Jones rises by about 140 points, while the Nasdaq rises by about 40 points.
06/11/2024
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