Gold portrays pre-Fed anxiety as markets brace for dovish rate hike

Traders across the board prepare for the Federal Reserve’s (Fed) monetary policy announcements, more importantly for Fed Chair Jerome Powell’s press conference, as recent downbeat US data signals the inflation fears as receding. However, the policymakers have been hawkish before they slipped into the blackout period and Powell isn’t known for his dovish move, which in turn amplifies the market’s anxiety before the key event. 

In addition to the Fed statements, the monthly PMIs are also on the calendar and offer controls to the momentum.

That being said, the US Dollar remains on the back foot after recalling the bears on softer data the previous day. However, the prices of Gold and Crude oil struggle to recover.

AUDUSD cheers the downbeat USD and firmer prints of PMIs from China and Australia. EURUSD, on other hand, remains the most inactive among the major currencies pairs as not only the Fed but the ECB decision is also pending, up for publishing tomorrow.

US Stock futures are down even as Wall Street posted notable gains whereas the US Treasury bond yields are also on the back foot.

Cryptocurrencies ignore regulatory hardships from the UK amid an upbeat chain matrix and softer USD.

Following are the latest moves of the key assets:

• Brent oil grinds higher towards $86.00, mildly bid by the press time.
• Gold reverses the previous day’s corrective bounce but lacks momentum near $1,925 as we write.
• USD Index stays pressured near 102.00 as markets brace for Fed’s verdict.
• Wall Street closed with gains and helped the equity bulls in the Asia-Pacific, as well as in Europe and the UK, even if the moves were quiet of late.
• BTCUSD and ETHUSD stay mildly bid near $23,000 and $1,580 at the latest.

The nail-biting hours!

Markets appear to behave like Christmas holidays as traders remain divided over the Fed’s verdict, even if the 0.25% rate hike is already given. The reason could be linked to the concentration on the policy pivot talks.

Tuesday’s early signals for US inflation took the last shot at the US Dollar and snapped the greenback’s three-day recovery. Also weighing on the USD were firmer EU sentiment numbers even as German Retail Sales put a floor under the prices.

It should be noted that China’s unimpressive Caixin PMI joined upbeat Aussie activity numbers but couldn’t shake the market moves. Also important were New Zealand’s employment data which pushed back hawkish hopes from RBNZ and weighed on the NZDUSD.

Gold remains depressed despite the latest inaction as China fails to convince metal buyers and also there are fears that the Fed would disappoint the bears. Crude Oil remains sidelined after bouncing off the two-weeks low as the OPEC+ decision looms.

Elsewhere, UK’s fresh regulations on cryptos contrast with the upbeat chain matrix but the BTCUSD and ETHUSD remain mildly bid near the multi-day top.

• Strong buy: GBPUSD
• Strong sell: ETHUSD, USDJPY
• Buy: USD Index, USDCAD, Nasdaq, EURUSD
• Sell: DAX, FTSE 100, gold, BTCUSD, AUDUSD

All eyes on Fed Chair Powel

Looking forward, multiple PMIs and second-tier data, as well as OPEC+ meeting, will decorate the economic calendar but traders aren’t expected to overcome the market’s currency inaction amid the cautious mood surrounding the FOMC. Also likely to clutch the market’s moves are the mixed hopes from the Fed and the presence of the ECB and BoE monetary policy meetings afterward.

That said, Fed Chair Powell’s hawkish words will be enough to bolster the US dollar and roil the market sentiment, which in turn extends the Gold price weakness.

May the trading luck be with you!