GOLD, DOW JONES, US DOLLAR – MARKET REACTIONS TO JANUARY 2021 FEDERAL RESERVE ANNOUNCEMENT
- Federal Reserve holds its coverage rate of interest and tempo of asset purchases regular as anticipated
- US Greenback continues to commerce on its entrance foot whereas gold and the Dow stay underneath strain
- Focus now shifts to anticipated remarks from Fed Chair Powell following the FOMC assertion
The Federal Reserve simply introduced that it plans to go away its benchmark rate of interest vary unchanged at 0.00-0.25% and keep the present tempo of asset purchases at $120-billion monthly. Markets have moved little within the quick response seeing that the newest FOMC determination to face pat on coverage was extensively anticipated. Fed officers famous that the tempo of financial exercise recovering has moderated of their assertion, although this additionally comes as little shock. That mentioned, key belongings like gold, the Dow Jones, and US Greenback have been doused with a wave of volatility main into the Fed assertion launch.
One driver might be merchants speculating on whether or not or not Fed Chair Jerome Powell will present less-dovish ahead steerage throughout his press convention set to kick-off at 19:30 GMT. To that finish, it’s value noting that the top central banker said how “now just isn’t the time to be speaking about adjustments to asset purchases” simply two weeks in the past. However, in mild of current GameStop mania, arguably a byproduct of frothy market circumstances, merchants will doubtless be sitting on the sting of their seats plugged into the Powell presser for hints as to when the Fed would possibly begin to siphon liquidity.
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GOLD PRICE CHART: 15-MINUTE TIME FRAME (26 JAN TO 27 JAN 2021)
Chart by @RichDvorakFX created utilizing TradingView
Gold value motion is buying and selling -0.3% decrease on the session on the time of writing. The valuable metallic plunged as a lot as -1.1% intraday to the $1,830-price stage earlier than clawing again some draw back. It seems that gold costs have been largely mirroring the route of the US Greenback, which has discovered a recent bid owing to the inflow of threat aversion and demand for safe-haven currencies. Gold and the US Greenback sometimes transfer in other way of each other.
The broader bullish narrative underpinning gold value motion doubtless stays intact as long as the Fed continues to face by its uber-accomodative financial coverage dedication. However, if FOMC officers like Chair Powell level to a less-dovish coverage stance on the not-too-distant horizon, gold costs may come underneath appreciable strain. To not point out, if the restoration in financial exercise continues to stall, future inflation expectations may peel again and weigh negatively on gold value motion additionally.
DOW JONES PRICE CHART: 15-MINUTE TIME FRAME (22 JAN TO 27 JAN 2021)
Chart by @RichDvorakFX created utilizing TradingView
Main inventory indices are nonetheless buying and selling on their again foot within the wake of the FOMC assertion launch. The Dow Jones Industrial Common is at the moment down -1.3% with market sentiment seemingly deteriorating. Shares within the Dow Jones may commerce equally to gold contemplating Fed liquidity and the tempo of financial exercise pose two major drivers of their route. As such, the Dow and equities extra broadly may face headwinds if Fed Chair Powell opts to speak down investor threat urge for food throughout his presser. This might carry the US Greenback into focus as a possible bellwether to the place markets head subsequent.
US DOLLAR INDEX PRICE CHART: 15-MINUTE TIME FRAME (26 JAN TO 27 JAN 2021)
Chart by @RichDvorakFX created utilizing TradingView
The US Greenback has strengthened broadly to date as we speak gauging by the DXY Index. US Greenback upside largely tracked the risk-off lead from markets earlier this morning previous to the FOMC assertion launch. Continued US Greenback power may observe a cautious tone conveyed by Fed Chair Powell relating to the economic system. Conversely, if Fed Chair Powell echoes that the central financial institution intends to go away monetary circumstances accommodative, there might be a resumption of the broader bearish US Greenback development. Listed here are technical ranges to look at for the US Greenback.
— Written by Wealthy Dvorak, Analyst for DailyFX.com
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