Gold Quivers as Powell Takes Centre Stage

King Dollar appreciated against a basket of major currencies on Tuesday as the hotly anticipated FOMC meeting got underway. However, the greenback is trading lower on Wednesday’s session. This is Fed Chair Jerome Powell’s first such outing, and the markets are widely expecting his Central Bank to raise interest rates today. Attention will be centered on the press conference and ‘dot plot’ chart, the Fed’s de facto policy forecast.

Whether the Federal Reserve will raise interest rates three times or four this year has been a major market theme, and it is widely hoped that the meeting will offer fresh insight and clues as to the US interest rate timings for 2018. As trading drew to a close last night, market commentators were confident in their predictions that a hike was imminent. Powell has previously expressed optimism over the health of the US economy, could we see the Fed follow a similar tone today?

The Dollar is at risk from depreciation if Powell strikes a less hawkish tone than the markets expect. It is worth noting that the Dollar is still in the grip of the political uncertainty radiating from Washington, not to mention concerns that the pending trade war could negatively impact the US economy. These conflicting fundamental drivers behind the Dollar could send the currency on a rollercoaster ride, with bulls likely to find support in the form of rate hike expectations and bears remaining inspired by US political uncertainty.

Taking a look at the technical picture, the Dollar Index still remains pressured below the 91.00 resistance level. Will Jerome Powell inspire bulls with enough inspiration to conquer this level? That is the question everyone is asking.

Gold Gets the Jitters

The prospects of an interest rate hike this week has left Gold wobbly and vulnerable. The metal rallied slightly on Tuesday as stocks dropped across the board, and continues to extend its gains on Wednesday ahead of the Fed meeting.

Although trade war fears and political uncertainty have somewhat stimulated appetite for the yellow metal in recent weeks, the market was more concerned about possible March US rate hikes, which likely contributed to yesterday’s downside.

It should be kept in mind that Gold is a zero-yielding asset and is likely to feel the heat in a high-interest rate environment. A catalyst is clearly needed for Gold to make its next big move and this could come in the form of Powell. Prices are coming under increasing selling pressure on the daily charts, with the psychological $1300 the next key level of interest.

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