After the Federal Reserve decided to delay the rate hike again, allowing global equities to soar across the board and the US Dollar to lose around 1% in only a few days, traders need to stay alert towards upcoming events and economic releases, which should have a direct link to the Federal Reserve’s decision. Staying focused on such elements is crucial to our understanding of how the market may react from now until the end of the year, or at least until December’s meeting.
Why Is This Important?
Well as we all know, the market always prices in expectations and not facts. Meaning, central bank decisions are priced into the market before the actual decision is released. This is a result of traders’ expectations, which are based upon relevant economic figures released before the decision. If the decisions of the central banks come as expected, sometimes the markets show a slight move only. Therefore, traders should still expect higher volatility ahead.
What To Look For?
Since the Federal Reserve raised the Fed Fund Rate back in December of last year, the Fed has been using many excuses to not raise it again. The Fed promised the markets with around 4 rate hikes this year, but so far, they have not raised once. Why? Because the first rate hike had a notable impact on volatility, economic releases and corporate earnings.
In the next few weeks, traders need to keep an eye on market volatility and economic releases, which will give a clear indication of the Federal Reserve’s upcoming decisions.
Which Economic Releases Matter The Most?
Many of them matter; however, the Fed is always most concerned about the jobs report, inflation, growth, and consumer confidence. Keep an eye on the following releases and track them in the coming weeks:
- Jobs Report, including the new jobs, created unemployment rate and most importantly the wages growth.
- Inflation data, including, CPI, Core CPI for on MoM and YoY, but most importantly, the Fed will be looking at its favorite inflation index which is called the Core PCE Price Index.
- Growth, including GDP QoQ and YoY
- Economic Activities, including the ISM Manufacturing PMI and the Services PMI, which slowed down notably in the past few months, and they were one of the reasons why the Fed kept the rates on hold throughout the year.
- Consumer Confidence, including University of Michigan Consumer Confidence Index and the official CB Consumer Confidence Index
- Finally, traders need to watch the US equities, especially the S&P500, lower stocks with higher VIX index would also affect the Federal Reserve decision.
What About USD Index
This is another major index to watch over the coming weeks. Why? Because the Federal Reserve noticed the headwind that affected the economy when the index reached the 100.0 mark. Since then, the Fed has been trying to keep the Dollar Index lower and below that level. Therefore, traders also need to keep an eye on that mark, as a break above that resistance, would decrease the chances for any rate hike this year.