Today the Fed concludes its two-day FOMC meeting. The consensus is for the Fed to leave interest rates unchanged at 0 to .25%. The key to this report will be the Fed’s statement. This is what traders are debating.
One school of thought has the Fed aggressively increasing its purchase of government debt and mortgages in an effort to keep downside pressure on interest rates. Another school of thought says the Fed will not make any changes to its quantitative easing plans.
Some investors will be looking for the Fed to set a hard calendar date for an interest rate hike while others believe the Fed will leave the date open.
This report and statement will have a huge impact on the markets following its release around 1:15pm CDT. This is because of the current state of the economy and the fact that the Fed will not have another meeting until August.
The Treasury Department will have another Note auction today. Yesterday’s auction was well received. Traders expect today’s auction to be successful. Based on overnight action, the September Treasury Bonds and Notes are called lower. This could be position evening ahead of the auction and the FOMC statement. Trading could be categorized as choppy or two-sided.
An announcement of more quantitative easing by the Fed is likely to trigger a huge spike in the financials to the upside. The size of the move will be dictated by the size of the Fed package. If the Fed talks about leaving its balance sheet unchanged, then look for pressure on the bonds and notes.
The U.S. Dollar is all over the map in the pre-market trade. Position evening and uncertainty are the driving forces behind the two-sided trade. Today’s Fed statement will have a big impact on the U.S. Dollar. If the Fed mentions a hard calendar date for an interest rate hike then the Dollar is likely to soar on the news.
August Gold and September Silver are up on technical factors and a slightly weaker Dollar. Both contracts completed major retracements of their spring rallies. The lack of buyers in these areas triggered closing price reversal bottoms which contributed to this morning’s firmer tone.
Look for the precious metals to rally substantially if the FOMC statement weakens the Dollar.
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