The futures markets are still pricing in a 75-basis-point hike at the Fed's meeting this week, they now expect only a half-point increase in December and no more than a half a point further over the next two meetings. Stalling demand last quarter left some traders anticipating that the U.S. central bank could signal at its Nov. 1-2 policy meeting that it will deliver smaller rate hikes in December and early next year, though much would depend on inflation. A survey from the University of Michigan on Friday showed consumers' near-term and five-year inflation expectations increased this month from September.
Trading recommendation: buy 3820 and take profit 3930.
A core gauge of US inflation accelerated in September, while consumer spending stayed resilient, bolstering the Fed’s case for another jumbo rate hike next week. But a contraction in manufacturing and services, and lower-than-expected US home sales, indicated that Fed tightening is already hitting the economy. Investors are still expecting the Fed to raise rates by three-quarters of a percentage point for the fourth time in a row this week. The biggest risk is that the Fed overdoes it since inflation tends to react quite slowly to higher rates, likely even more so this cycle given still not fully understood distortions to the economy caused by the COVID pandemic. This is a negative signal for precious metals.
Trading recommendation: buy 1610 and take profit 1645.
The diesel shortage that had the White House on edge last week is spreading from the Northeast to the Southeast, prompting at least one supplier to initiate emergency protocols. Diesel inventories nationwide are at lowest seasonal level ever heading into winter, and some areas in the Northeast have already started rationing fuel. The shortage is almost certain to drive up prices for the heating and trucking fuel, further straining household budgets. The scarcity has prompted some traders to take physical delivery of fuel off the Nymex contract, turning the financial tool into an unusual source of supply. Those deliveries will take place in the first-half of November.
Trading recommendation: buy 83.50 and take profit 86.00