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With Fed widely expected to keep its monetary policy unchanged, market will be focusing on Powell’s press conference on Fed’s forward guidance. Long gold at dip?

FOMC tomorrow will be one of the main events for the week as it will be Fed’s last meeting in 2019. However, we are not expecting any big changes and Fed will likely be keeping its monetary policy unchanged. 

Since the last rate cut in October which was the third cut in 2019, Fed said that the latest cut was an insurance for further downside in the market. Uncertainty in trade development and slowing global growth were the main concerns but one of those issues has improved tremendously. US data for the past month has shown signs of improvement from consumer spending, labour data to manufacturing and services ISMs. 

Instead of the monetary policy statement, the market will be focusing on Powell’s press conference to look for further justification for a stronger dollar. We believe that Powell will most likely talk about the strength of the economy and has no reason to create further volatility by focusing on the minor weaknesses.

Having said that, we must note that the 15 December tariff issue is still not resolved between the US and China. Trump has not come out to say whether the tariffs are being suspended or will come into effect. This will be the main downside risk which will prevent the dollar from moving higher or gold from moving lower.

XAU/USD (Gold) has been traded higher but still in a sideway range. We believe that a fall in gold provides long opportunities for traders due to uncertainties from the 15 December US-China tariffs.

Fullerton Markets Research Team

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