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 Gold popped in early New York trading as the latest weak economic
data dimmed prospects for a more hawkish tone from the Fed later today. The
yellow metal rose from unchanged on the day to trade nearly $10 higher before
stabilizing intraday.
The Fed announces policy at 2:00ET today. They are widely expected to hold
steady. Traders will carefully parse the language in the statement in an
effort to get a sense whether of whether a rate hike is in the cards for
September or December.
The probability of a hike has been rising recently based on Fed funds
futures, but today's sizable miss on June durable goods orders seems to have
tempered those expectations. Durable goods came in at -4.0%, well below
expectations of -1.0%, versus a negative revised -2.8% in May.
I suspect there will be very little change from the June statement. There may
be some mention of markets stabilizing in the wake of the surprise Brexit
vote, which occurred just about a week after the June FOMC meeting.
The likelihood that the BoJ will offer further accommodations when they
announce policy on Friday got a boost from PM Abe today. The master of
Abenomics announced a larger than expected ¥28 trillion stimulus proposal
today. It was widely believed that the duo of Abe and Kuroda would not
squander the former's upper-house electoral victory, viewing it as a
referendum on Abenomics. Abe has delivered. Now we await Kuroda's offering.
In a Bloomberg
article, Yasunari Ueno, the chief market economist at Mizuho Securities
said the government is pretending it has resources even though they don’t.
However, Kuroda's BoJ has the ability to print those resources (yen) and he
has shown no compunction about doing just that.
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