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Market participants laser-focused on next week’s FOMC meeting

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On Tuesday of next week, the Federal Reserve will hold its second Open Market Committee meeting of the year. This will be followed by an FOMC statement and press conference by Chairman Jerome Powell on the following day March 22.

Speculation as to whether the Federal Reserve will raise rates as they have consecutively at every FOMC meeting since March 2022. Furthermore, there is speculation as to what size of a rate hike will be announced if they continue to use their tools of rate hikes to lower inflation. Speculation regarding the next steps of the Federal Reserve is fluid and changes daily.

One week ago, on March 9 the probability that the Federal Reserve would take a break from the consecutive rate hikes was zero according to the CME’s FedWatch tool. Yesterday the FedWatch tool predicted that there was a 45.4% probability that the Fed would not raise rates next week. Today that probability has lessened to 18.1%. Currently, CME’s FedWatch tool is projecting an 81.9% probability that the Federal Reserve will raise rates by ¼%.

The volatility in projections for the actions of the Federal Reserve is directly tied to not only the latest jobs report and inflation report but also has taken into consideration the recent banking meltdowns by two banks United States; California’s Silicon Valley Bank and the Signature Bank of New York.

The most recent development is a large injection of capital with a pledge of $30 billion to be funded by 11 major US banks which will be deposited into the First Republic Bank. Federal banking regulators applauded the support of this large bank group because it validates the resilience of the banking system in the United States.

According to MarketWatch, “Secretary of the Treasury Janet Yellen, Federal Reserve Chairman Jerome Powell, FDIC Chairman Martin Gruenberg and Acting Comptroller of the Currency Michael Hsu said that “this show of support by a group of large banks is most welcome, and demonstrates the resilience of the banking system”.”

This move resulted in solid gains in US equities as well as declines in both gold and the dollar. As of 5:15 PM EST, the most active April gold futures contract is down $7.50 or 0.39% and fixed at $1923.80. Concurrently dollar weakness has resulted in the dollar dropping by 0.14% taking the dollar index to 104.125.

Wishing you as always good trading,

Gary S. Wagner - Executive Producer