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Federal Reserve Chairman Warsh will hold a monetary policy press conference in ten minutes.On July 30th, Federal Reserve officials kept interest rates unchanged, but the vote was divided, showing that some policymakers are increasingly convinced that a rate hike is needed to curb rising inflation. Logan, Hammark, and Kashkari all voted against a 25-basis-point increase. This marks the fifth consecutive time officials have chosen to keep rates unchanged. The rest of the committees post-meeting statement was entirely consistent with the statement released after the June meeting. Officials reiterated their commitment to "achieving price stability." However, the dissenting votes suggest that for Fed Chair Warsh, who just took office in May, continuing to hold rates steady will face greater challenges if inflation concerns intensify. Trump has repeatedly called for rate cuts, including this Monday. Warsh, nominated by Trump to be Fed Chair earlier this year, stated that he would ensure policy decisions are not influenced by politics.On July 30th, in this interest rate decision, three of the five regional Federal Reserve presidents voting on the Federal Open Market Committee (FOMC) voted against it: Cleveland Fed President Hammark, Minneapolis Fed President Kashkari, and Dallas Fed President Logan. All three unanimously advocated for a 25 basis point rate hike. This is the first time since September 2016 that the Fed has seen three unanimous dissenting votes in a single policy decision, reflecting a growing voice within the Fed supporting a tightening policy. Fed Chairman Warsh, who supports maintaining the current interest rate, has consistently emphasized the Feds responsibility to curb inflation. He is expected to be asked at the press conference at 2:30 AM Beijing time why he believes continuing to be patient remains the most appropriate policy option.Market expectations indicate that the market is no longer fully pricing in a September rate hike by the Federal Reserve.Nick Timuraos, the Feds mouthpiece: The FOMC decided to keep interest rates unchanged with a 9-3 vote. Three regional Fed presidents voted against a 25-basis-point rate hike. This is the first time since 2016 that the Fed has received three unanimous dissenting votes in a single policy decision.

Gold Price Prediction: XAU/USD clings to 29-month low near $1,650; Ukraine, Fed's Powell in spotlight

Daniel Rogers

Sep 26, 2022 12:01

Gold price (XAU/USD) licks its wounds around a two-year bottom, at $1,645 during Monday's Asian session, as bears take a breather following the week's largest daily decline ahead of important catalysts. The contradictory news regarding Europe and Russia may further put pressure on metal prices. Despite this, bears remain optimistic despite the widespread rush to endanger safety.

 

Germany's ability to secure a gas contract with Abu Dhabi, as well as Russia's lack of rapid response to Group of Seven (G7) chatter about mustering guts against Moscow, indicated a correction in mood. Recently, a holiday in New Zealand and a light calendar in Asia allowed the XAU/USD bears to catch their breath.

 

During the past week, the gold price was pushed down by high US PMIs, weak activity data from the bloc, Russia's stern warning to the West, and the Group of Seven's (G7) readiness to respond with penalties. In addition, the XAU/USD was pulled down by hawkish central bankers and fears of recession.

 

Nonetheless, the initial readings of the S&P Global PMI for the month of September indicated that the European economy contracted significantly, hampered by rising energy prices. The German Services PMI reached its lowest level in two years, while its European counterpart reached its lowest level in 19 months. In addition, Manufacturing PMIs reached their lowest level in twenty months. In September, the US S&P Global Manufacturing PMI increased to 51.8 from 51.5, and the US S&P Global Services PMI improved from 44.6 to 49.0.

 

Jerome Powell, chairman of the Federal Reserve, stated elsewhere on Friday, "We are committed to deploying our tools." Following him, Fed Vice Chair Lael Brainard stated that 'hard' inflation is impacting low-income people. Raphael Bostic, president of the Atlanta Federal Reserve, told CBS' "Face the Nation" over the weekend that he still believes the central bank can reduce inflation without substantial job losses, given the economy's sustained pace, as reported by Reuters, citing the Fed official's interview.

 

According to a recent CBS interview, Ukraine's president Zelenskiy stated that "Putin's nuclear threats may have been a bluff, but now they might become a reality." The United States, meanwhile, warned of "catastrophic repercussions" if Moscow used nuclear weapons in Ukraine, after Russia's foreign minister stated that territories hosting heavily condemned referendums would receive full security if annexed by Moscow.

 

Wall Street closed in the red, US Treasury yields increased, and the US Dollar Index (DXY) reached a new multi-year high against this backdrop. Consequently, S&P 500 Futures record modest losses at the latest.

 

Intraday movements will be heavily influenced by Italy's election results and a statement by European Central Bank (ECB) President Christine Lagarde. Nonetheless, the week will be dominated by the Ukraine-Russia conflict, comments from Fed Chair Powell, and US Durable Goods Orders for direction.


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