The Fed will get more aggressive | 17 June 2022

#SP500:

May’s red-hot inflation hardened expectations the Federal Reserve will keep raising interest rates in half-point steps through September. Investors increased bets on a 75-basis point hike after data Friday showed consumer prices accelerating to a fresh 40-year high. Powell will hold a press conference after the conclusion of the Fed’s two-day meeting on Wednesday. He’s already put half-point moves on the table for this month and next and said officials will keep pushing until they see “clear and convincing” evidence prices are cooling. There was scant sign of that in Friday’s data. The consumer price index increased 8.6% from a year earlier in a broad-based advance. Core CPI, which strips out the more volatile food and energy components, rose 0.6% from the prior month and 6% from a year ago, also above forecasts.

Trading recommendation: sell 3860 and take profit 3744.

#WTI:

Shanghai and Beijing went back on COVID alert. Parts of Shanghai imposed new lockdown restrictions and the city announced a round of mass testing for millions of residents. This is a negative signal for oil prices. Prospects are receding for reaching a nuclear deal with Iran and lifting U.S. sanctions on the Iranian energy sector. Iran dealt a near-fatal blow to chances of reviving the nuclear deal as it began removing essentially all the International Atomic Energy Agency monitoring equipment installed under the deal, IAEA chief Rafael Grossi said. This is a positive signal for oil prices.

Trading recommendation: range 113.20 -118.10.

XAUUSD:

Stubbornly hot U.S. inflation is fueling bets that the Federal Reserve will get more aggressive about trying to cool price pressures and even potentially ditch its own forward guidance by delivering a jumbo-sized interest rate hike in coming months. Fed policymakers had already all but promised half-point interest rate hikes at their meeting next week and again in late July, following May's half-point hike and the start of balance sheet reductions this month. That would be more policy tightening in the space of three months than the Fed did in all of 2018. Yields on the two-year Treasury note, seen as a proxy for the Fed's policy rate, topped 3% for the first time since 2008. This is a positive signal for the dollar and a negative one for gold, since assets have an inverse correlation.

Trading recommendation: sell 1867 and take profit 1828.