High Impact Events Trading... Gold & Copper

You nailed it.
I don t see my points any differences with yours !! Gold has been going nowhere since then

Hey guys.

While the market has got its probabilities staked out in terms of what the rate cute may be and also whether or not there will be one. My question or particular point of interest is solely to see how the shake and bake on both side goes.....just looking at the past rate announcement from ECB and BOE etc and the swings we saw there.....I'm wondering how extensive those spikes for the fed may be.....and hence my premenition to rather sit out the actual event itself and get busy thereafter.......surely given the speeches and announcements we may hear leading up to the actual event itself should maybe provide said volatility and give some sort of indication of what can be expected therein.

We won't be hearing from any Fed officials because of the black out period. This is a good bookmark to have: https://www.stlouisfed.org/about-us/...ackout-periods

I don't think I will be entering the market ahead of the event. At release time, it'll be interesting because the market is usually not so divided in expectations prior to the Fed moving rates. So we can surely expect a spike on a 25bp rate cut. If the expectations remain as high as they are for a 50bp rate cut, initially the USD will spike and gold will probably dive. But that will likely be the beginning. That's why this might be a good one to sit out.

After the initial move from the rate announcement, traders are going to be looking at how dovish or hawkish the Fed is in the FOMC rate statement and if there's any forward guidance on rates. If there's not enough in the rate statement, which we might expect because the Fed likes to remain vague for the sake of the markets. Then, in this situation Powell's Press Conference is going to ultimately decide what sentiment the market finally takes on rates going forward.

I hope to have a preview up ahead of the event, but my thinking right now is to sit out initially and see what the FOMC statement says. But I'll probably wait until the Powell's testimony because any initial direction could easily be reversed. If the Fed cuts by only 25 basis points but remains dovish, gold could dive than rally. That's the most likely scenario as of right now from everything I've gathered. But things could change daily this week.

To quote benlong and Ra7. You nailed it. Valuable analysis which gave reason to the direction the markets took on Friday. Awesome job sir!

Thanks for the heads up visa ve the e blackout bud. Do you see how we need you fundie guys to assist some of us. We tend to just get glued onto charts and nothing more. I am trying to keep abreast of the key fundies though......

Agreed. Best to sit out the event and position accordingly post event!!!!

Green pips all around......

Take on BOJ announcement?

I think if we see them shift to either more easing or a more dovish stance, it could trigger some buying in gold. I'm not sure if we'll get a rally, but the possibility exists. Check out the news comment I made here: https://www.metalsmine.com/news/9367...g#post12409770

hello please guys anyone can help me with the indicator

Chinese Manufacturing PMI - July Preview

1. CH Manufacturing PMI

Notes:

1. This data is released on the last day of the month, frequently falling on a weekend during closed markets.
2. When this data is released while the market is open, it tends to have a bigger impact.
3. In order for this data to have any significant impact on precious metals, it would have to impact market sentiment.
4. Manufacturing PMI data impacts copper more than it does precious metals. It also can impact the AUD/USD.
5. It's released along with Chinese Services PMI data, which can also impact the markets but to a lesser extent.
6. It's released ahead of the Caixin Manufacturing PMI, which tends to give it more impact since it's released first.
7. The forecast is for 49.6 vs 49.4 prior.
8. According to the economists surveyed, more believe that the actual will miss consensus forecast.
9. There isn't a forecast that's predicting PMI to come in above 50.0.
10. A better than expected number will usually support copper prices as well as the aussie dollar, while a weaker than expected figure can trigger selling in the two.

Recent Impact on Copper and AUD/USD:
I left out June's release since it was a weekend release and didn't have impact. Below the May and April releases and their impact on copper and AUD/USD are displayed.

May:

April:


Conclusion:
Manufacturing PMI data usually doesn't have significant impact, but the potential is there. We will likely need a significant deviation from forecasts to see any considerable impact. There isn't much trading opportunity related to this event. I'd advise against trying to trade this event, but it's always one to watch. Good luck out there!

I'm not sure which indicator you are wanting help with. But if you want to discuss calendar events or anything related to fundamentals, you're welcome to do so in this thread.

Personal Spending • Tuesday 30.7.2019.


We will receive June estimates for personal income and spending today.

Given this friday’s release of second quarter GDP and the solid 4.3% annualized gain in personal consumption expenditures (PCE), spending looks to have fared pretty well in June.Given strong recent monthly data on retail spending, the solid rise in Q2 PCE came as little surprise. Indeed, the consumer looks to be in good shape after a weak start to the year.

Notably, this friday’s GDP release showed a big upward revision in the personal saving rate in the first quarter, which may, at least in part, explain the weaker consumer spending in that period.


Previous: 0.4%

Personal opinion: 0.4%

Consensus: 0.3%

Attached Image

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Consumer confidence • Tuesday 30.7.2019.

Consumer confidence, has waned since May, dropping almost 10 points to 121.5. But, I expect confidence to rebound to 129 in July, which should support a 0.4% gain in personal spending in June. Should the Fed cut rates next week, as we expect it will, spending could also get a boost in coming months.

Previous: 121.5

Personal opinion: 129

Consensus: 125.1

Nice forecast here. You called the surprise to the upside.

This event has no history of impacting precious metals or copper. So while I'm not posting a preview, it's worth mentioning because I believe the aussie dollar is about to get rocked.

Australian CPI figures are due out at 9:30pm ET. Both the overall figure and the Trimmed Mean CPI have the potential to move the Aussie dollar maybe more than any other Australian calendar event.

I'll be watching because those forecasts look a little high, especially the Trimmed Mean number. If it misses, watch out. The AUD/USD could sell off. It's already been weakening so I'd say there's probably limited upside potential. Like I said though, on weaker than expected data, look out below: Rate expectations could shift (they have been slightly)

First though, China's Manufacturing PMI data will be released, previewed here. The aussie dollar is about to hit some turbulence. Copper may be impacted by the Chinese data. Other than that, I don't expect metals to move much on any of tonight's data.

FOMC Meeting - July Preview

1. FOMC Statement
2. Federal Funds Rate
3. FOMC Press Conference

Notes:

1. The consensus forecast is for a 25 basis point rate cut.
2. Currently the CME FedWatch Tool is showing that the market has priced in a 78.1% change of a 25bp rate cut. 21.9% of the market still thinks the Fed will deliver a 50bp rate cut.
3. Of over 80 economist estimates, only Morgan Stanley Group is predicting a 50bp rate cut.
4. In a stark contrast to market expectations, about 10% of economists are predicting rates to remain unchanged.
5. The majority of estimates are in line, forecasting the Fed to cut by 25 basis points.
6. This would be the first rate cut since 2008.
7. Just as important as the rate cut, is the tone and language the Fed delivers in the Rate Statement.
8. There will be a lot of focus on the FOMC Statement, but the Fed is likely to issue a tone that doesn't dash the prospects of future rate cuts currently held by the market.
9. Economic Projections will not be released during this FOMC meeting.
10. Powell's press conference is likely going to be just as anticipated as the rate statement, if not more. He's not in a position to promise any upcoming rate cut. It's widely expected that he's going to attempt to remain vague in order to not disrupt the markets.
11. It's going to be difficult for Powell to remain dovish in the Q&A, as journalists have data ready to show that any rate cut at this point is more of an insurance cut against the prospects of a possible slowdown.
12. Many are viewing tomorrow's rate cut as an attempt to keep the expansion going.
13. There likelihood of an initial knee-jerk reaction is almost a certainty because the markets are so divided on expectations.
14. Possibly more important than the rate cut is how the markets will digest the rate statement.
15. The tone of the rate statement will be the trigger for any direction the markets take after any initial knee-jerk reaction.
16. Take note of any dissenters to the rate cut. It's possible that Rosengren along with George are at least two Fed members suspected of dissenting against the rate cut. They are both voters. In total, there are 10 Fed members that vote on rates.
17. 30 minutes after the rate announcement and statement, Powell takes the stage.
18. Powell is a wildcard. He could support the dissenters and hawkishly say that this may not be the first cut in a series of cuts. That would lead the markets to believing the Fed might be 'one and done.'
19. Powell may also come out against those dissenters and reinforce the Fed's dovish outlook meaning there's more bias towards further easing.
20. The uncertainty going into an FOMC meeting hasn't been this high in a very long time. The possible scenarios of what could happen are high enough to exercise caution ahead and during the event.

Recent impact on Gold, EUR/USD, and USD/JPY
Displayed below are charts showing the impact of both the rate announcement/rate statment and the FOMC press conference. The charts are darkened out prior to 2pm and the vertical line displays at the beginning of the press conference. First one is gold, then usd/jpy, and eur/usd at the bottom.

June

May


March


Conclusion:
There's not much advice to be given here but to be cautious. We know that the markets will react when the rate cut is announced. Since, the expectations are divided going in, the initial move will likely be pretty significant. There's a lot of speculation about the Rate Statement, even more uncertainty. That's likely to give direction to the USD and gold, as the markets digest the information. A hawkish statement will send gold lower as the USD rallies. A dovish tone in the statement will likely trigger buying in gold, and selling in the USD. Finally, Powell's press conference will move the markets. He will deliver his initial statement and then answer questions from journalists. Volatility should be expected. The markets could take a direction if Powell makes it clear what the bias is.

The Fed didn't do a good job in providing the markets with the guidance necessary to take the uncertainty out of the rate cut announcement. This makes the statement and press conference a little more complicated as the Fed ultimately will want to calm the markets, especially the domestic equity markets. We'll see if they're able to do that.

While there's plenty of trading opportunity related to this event, the number of scenarios that could play out are numerous. It's going to come down to what triggers the market to take a sentiment of either believing the Fed is dovish or hawkish after the rate cut.

Be careful out there fellow traders.

Great write up. Your point about institutional economist pricing in a 10% chance on no change was particularly fascinating; what a reaction that would cause!

Being very long equities, I'm nervous they'll do a hawkish cut. What I really don't want to see is a 25bps cut and them say its one and done. The trade for the past few months has been to buy everything (gold, equities, bonds, etc) on the Fed entering into an easing cycle. That trade will unwind if their forward guidance indicates there won't be further cuts.

It's not like the Fed to make a move like that. They try very hard to keep the markets calm, the stock market probably most in particular. While I think a hawkish stance is a possibility, there are probably other scenarios with a greater chance of occurring. I't should be interesting.

FOMC Meeting • Wednesday 31.7.2019.

Scenario I: A Stich in Time Saves Nine

Actions:
- Fed funds rate: 25 bps cut
- Language: More upbeat on recent activity, but notes uncertainty and risks to the outlook persist, while inflation remains muted
- Dissent(s): George (Kansas City), Rosengren (Boston)
- Other Tweaks: None—balance sheet normalization continues as planned, no changes to IOER
- Probability: 35%


Detailed review:
The most likely outcome of the upcoming meeting in our view, and therefore our baseline call, is that the FOMC will cut rates by 25 bps. The statement will likely upgrade the recent performance of the economy to “solid” (as it was described as recently as May), as consumer spending has picked up more convincingly and job growth has rebounded. However, the statement and Chairman Powell in his press conference are expected to emphasize the continued risks and uncertainties the global trade environment presents to the outlook.

In light of those risks, the FOMC will likely deem it prudent to offer additional accommodation as part of a risk-management approach to policy. Given the limited space to cut the fed funds rate this cycle, the premise of this move would be to get out ahead of any meaningful slowdown in growth that could bring the expansion to an end. In addition, I expect to see the continued run of belowtarget inflation and the need to shore-up inflation expectations relayed as another reason for easier policy despite a generally strong economy (Figure 1). The door would remain open for additional cuts in the next few months.

The number and direction of dissents will be telling as to how much the Committee is coalescing around this “risk-management” approach. I would not be surprised to see a dissent from Kansas City Fed President Esther George and Boston Fed President Eric Rosengren in this scenario as each has been skeptical of additional accommodation at this time.


Summary: 25 bps cut and the door stays open for more easing soon.


Figure 1:




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Scenario II: The Hawkish cut

Actions:
-Fed Funds Rate: 25 bps cut
- Language: More upbeat on recent activity, downplays risks to the outlook
- Dissent(s): President Evans (Chicago)
- Other Tweaks: None
-Probability: 25%


Detailed review:
Words matter. In this scenario, the FOMC proceeds with the nearly universal expectation to cut the fed funds rate, but re-asserts control over expectations going forward. Since the committee’s last rate move (a 25 bps hike in December), it has struggled to manage the expectations of financial markets. Case in point, the futures market suggests a greater than 60% probability that the Fed will cut at least three times in the second half of 2019. Chances of two or even one more cut this year would look much less likely, however, with a “hawkish cut”.

What might this look like? In the statement, the assessment of recent activity generally and consumer spending specifically would be upgraded along the lines of our baseline case. “Uncertainties” in the outlook would be used to justify the meeting’s cut, but the statement would evoke a willingness to see how some of these uncertainties and the economy unfold given the additional policy support enacted. More evidence of a hawkish turn, however, would come from the Chairman in his press conference. We would expect to hear a more positive tone on recent data and have Powell remind us that the FOMC is data dependent. In addition, we would expect to hear more about the downsides of offering too much accommodation when the economy is still solid, such as the potential for financial imbalances to build.

A dissent in this scenario may come from Chicago President Evans. He has discussed the need for 50 bps of cuts this year to get inflation back above 2% and may therefore want to signal additional easing this year. St. Louis Fed President James Bullard is another notable dove. He has said, however, that he does not see the Fed entering an “easing cycle”, which makes me think he could be ok with a 25 bps cut now but then waiting to see how things go from here. The signaling to in essence be “patient” again may sufficiently placate Presidents George and Rosengren to where they vote along with the committee.

Summary:25 bps cut but then wait to see how things go.



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Scenario III: The Market-Friendly Move

Actions:
- Fed Funds Rate: 25 bps cut
- Language: Similar to June—risk and uncertainties in the outlook, inflation muted
- Dissent(s): George (Kansas City), Rosengren (Boston)
- Other Tweaks: End balance sheet run off immediately and/or extra 5 bps cut to IOER
- Probability: 20%


Detailed review:
Why meet when you can exceed expectations? The most likely outcome according to markets is for the FOMC to cut rates 25 bps, but the FOMC could throw in a little something extra. Specifically, it could announce concluding its balance sheet normalization immediately, rather than wrapping it up at the end of September, as is currently planned. The early end would leave the balance sheet approximately $28 billion larger than it would otherwise be. In practice, that would be a marginal amount given the Fed’s $3.8 trillion in assets at present (Figure 2), but would underscore the FOMC’s willingness to more proactively provide accommodation. A hurdle to this approach would be that the FOMC has emphasized the fed funds rate as its primary policy tool. However, the committee has adjusted balance sheet plans before, most recently in March.

Another subtle tweak that the FOMC may gift to markets would be an extra 5 bps cut to interest on excess reserves (IOER). The rate of IOER is supposed to serve as the top of the floor used to guide the fed funds rate since the financial crisis. For the past three years, the effective fed funds rate has traded above the midpoint of the FOMC’s target range. That led the FOMC to either raise IOER less than the target rate (June and December in 2018) or cut the IOER despite keeping the fed funds target unchanged (May 2019) to push it closer to the mid-point. Those moves have been considered technical adjustments. Currently the effective rate is closer to the mid-point than when prior technical adjustments were made (Figure 3), so an additional 5 bps cut on the IOER in July could therefore be a signal of some extra policy easing. The extra effort to ease policy would likely be considered superfluous to Kansas City Fed President Esther George and Boston Fed President Rosengren, leading each to dissent in this scenario.

Summary: Exceed expectations with an early end to unwinding QE and/or extra cut to IOER.

Figure 2

Figure 3



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Scenario IV: Shock and Awe

Actions:
- Fed Funds Rate: 50 bps cut
- Language: Dovish—emphasizes ongoing risks to outlook, muted inflation
- Dissent(s): Rosengren (Boston), George (Kansas City)
- Other Tweaks: Unlikely given the larger-than-expected fed funds cut, which is still viewed as the primary policy tool
- Probability: 15%


Detailer review:
Could a 50 bps cut be in the cards? Markets think this a real possibility. Currently futures have priced in about a 20% chance that the FOMC slashes the fed funds rate 50 bps. After all, global growth remains on the ropes and the downside risks of trade battles escalating with China and other countries loom large. At the same time, persistently low inflation suggests the need for more radical efforts to achieve the Fed’s target.

Cutting 50 bps immediately would send a strong signal that the FOMC is serious about generating higher inflation on a sustained basis. It would also provide a shot in the arm to capital spending, which the FOMC has highlighted as an area of concern. More generally, a large cut now would send a clear message that the FOMC is taking a more proactive approach to policymaking and staying ahead of the curve.

Such an aggressive move, however, could backfire. A 50 bps cut could suggest that the economy is in a more precarious position than it currently is. Business and consumer confidence could suffer, while markets get spooked. True, there is some precedent of the FOMC cutting rates 50 bps in prior cycles. But a key difference was that in each of those periods, the economy was showing signs of slipping into recession or struggling to emerge from one. The current period is more akin to the mid-cycle slowdown of the 1990s. In that period, the Fed cut just 25 bps in its opening bid.

Another reason to bet against this scenario is that the actual level of the main policy rate at 2.50% today is much lower than where it stood in 2007 (5.25%) or at the start of 2001 (6.50%). Finally, a 50 bps cut with the tightest labor market in decades, inflation low but firming and economic growth above potential could be seen as kowtowing to political pressure. Say goodbye to the Fed’s credibility as independent stewards of the economy.

Summary:50 bps of easing could backfire.


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Scenario V: Another FOMC pivot

Actions:
- Fed Funds Rate: No Change
- Language: More upbeat on the economy and inflation, but still will closely monitor incoming information and do what it takes to sustain expansion
- Dissent(s): Evans (Chicago), Bullard (St. Louis), Brainard (Board)
- Other Tweaks: None
- Probability: 5%


Detailed review:
The hawkish tail risk scenario ought to be considered as well. It would be unexpected, but not unthinkable for the Fed to not deliver at all on the expected accommodation. Chairman Powell certainly did not give that signal in his speeches and testimony the past few weeks. The committee, however, could see enough improvement in conditions and the outlook to hold fire for now. Maybe the rebound in payrolls in June was not enough for Powell to change his tune on the policy outlook when asked by Congress in his semi-annual testimony, but the labor market outlook is not the only area where data is looking better. Consumer spending now looks to have clocked a 4% pace in the second quarter, with fundamentals still solid. Inflation has also picked up, with both core CPI and core PCE increasing at least at a 2.0% annualized pace the past three months. Trade tensions have also diffused to an extent, with talks between the United States and China having resumed. In many ways, the economy and trade situation looks to be in-line with the outlook in early May, when the FOMC still pledged to be patient.

When financial markets have priced in the alluring promise of easy money, the letdown when you do not deliver can be substantial. Markets have been pricing in a 100% chance of a 25 bps cut this month since the FOMC released its more dovish statement in June. Chairman Powell has had a number of opportunities to stress some improvement in recent data and easing of trade tensions. He has not. Ditching the seemingly well-telegraphed rate cut would hit financial markets hard immediately. Ongoing challenges for the FOMC would also ensue, since the Chairman’s credibility would be eroded and the powerful tool of communication would be removed from his toolkit.

Needless to say, there would likely be a number of dissents in this scenario. Chicago Fed President Evans would almost assuredly be joined by Bullard, who is on the record saying he supports a cut in July. Lael Brainard may submit the first dissent by a governor in 14 years since she has recently said that basic principles of risk management would argue for softer monetary policy.

Summary:Hold fire now and communication will no longer be an effective policy tool.

One word respect

Seconded! Amazing some of the time these guys put in. I'm sure it's beneficial for themselves to write out their thoughts and lay it down but it is also great for us observers!

Outstanding write-up.