Following Wash’s high-profile speech on Friday, he reiterated his commitment to reducing inflation. Traders now believe the central bank is highly likely to raise interest rates at its next policy meeting in mid-September.
Wash stated that current financial conditions are not tight and described interest rates as the “primary tool” for the Fed to achieve its mandate, though he did not signal support for a September rate hike.
He also emphasized that inflation has not truly slowed, adding that if policymakers lack confidence in this regard, they still have “work to do”—comments that triggered negative sentiment in markets. After Wash’s remarks, traders increasingly bet on a September rate increase, despite skepticism from some market analysts.
Christophe Bouchard of ABN AMRO said, “The reaction mechanism remains unclear. If Wash does not back a September hike and inflation remains elevated in the meantime, credibility issues could indeed resurface.”
With an uncertain economic outlook and no forward guidance from Wash’s predecessors, swap traders are increasing their hedging positions for next month, pricing in about a 60% chance of a rate hike.
Wall Street’s downward trend spread to Asia, with MSCI Asia indices falling 0.3%, after initially dropping 1.1%. Futures suggest European equities will decline, while the tech-heavy Nasdaq 100 index may weaken further following last week’s semiconductor sell-off.
Gold prices dropped sharply from above 4600 to near 4400, losing nearly $200.
Plugin Case Showcase
Gold: Overnight price plunged by $200, entering the previous consolidation range. Monitor intraday consolidation; it may be prudent to wait one day. Watch whether prices can reclaim the 4450 level—should they do so, consider a breakout-and-retest buy strategy.
(Gold 15-minute chart)
Nasdaq: Affected by Wash’s comments, prices fell over 1% overnight, although they held above the 29,000/29,200 zone. The index has now broken out of the recent convergent consolidation pattern; watch for a buy limit opportunity upon retesting the blue zone.
(Nasdaq 15-minute chart)
Crude Oil: Prices opened higher with a gap up in the morning session, then retraced part of the gap. The key pivot for today lies between 84 and 83.50. As long as this area isn’t breached, bullish bias prevails; only if it breaks below should shorting on a pullback be considered.
(Crude oil 15-minute chart)
Today’s Key Economic Data and Events:
22:30 U.S. August Dallas Fed Business Activity Index
