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 Gold is consolidating ahead of today's Fed announcement, which
occurs at 2:00PM ET. The Fed is widely expected to announce steady policy,
even though less than two-weeks ago many were anticipating a rate hike this
summer.
The market will be paying close attention to the statement, and the tenor of
Janet Yellen during the follow-on press conference. It will be interesting to
see if there has been any further deterioration of the economic projections
and the number of anticipated hikes. The March dots favored two 25-bps hikes
in 2016, down from three at the December meeting. Here we are halfway through
the year and we're looking at a big goose-egg.
My guess is that the verbiage about data dependent gradual normalization will
remain. While some will view that as a suggestion that a July hike is still a
possibility, whether Ms. Yellen can lend any credibility that remains to be
seen. Arguably the Fed's credibility is already on very thin ice, so Yellen
is unlikely to oversell the prospect.
With the Brexit campaign gaining momentum in the UK, just over a week ahead
of the vote, Yellen is going to have to respond to questions on the topic.
While Brexit did not warrant a mention in the April FOMC statement, the
minutes of that meeting revealed that some members did express some concerns
about the referendum.
At the time, polling suggested the 'stay' campaign has a somewhat comfortable
lead. That's no longer the case.
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