The highly anticipated Federal Reserve meeting and statement release later this afternoon has market participants on pause with gold (GLD, quote), silver (SLV, quote) and copper (JJC, quote) futures basically flat ahead of the U.S open.
The question of the day is will the Fed tweak its language towards the hawkish side in its statement release.
Speculation that the Fed will begin its hawkish tilt has place a bid under the U.S. dollar (UUP, quote) and in turn added pressure to the metals. However, yesterday’s U.S. equity rally was not on any real news but rather rumor that the Fed will stay the course with extreme low rates.
Expectations this morning are for the Fed to reduce its bond purchase program by another $10 billion keeping it on track for it October unwinding and the possible interest rate hikes mid-2015. A friend mine this morning reminded me that we have not had a rate hike since 2006.
The problem lays in that the Fed Chair Janet Yellen has clearly stated that her concern is on the country's unemployment and this view point has been reiterated as recent as the Jackson Hole’s meeting and with August’s dismal jobs number and August's unemployment rate tick higher leaves the door open for the Fed.
I’m clearly one of those people today in the wait and see mode as with any of the Fed meetings we can be surprised but today’s seems to have a little added uncertainty to it. We just had the People's Bank of China injected $82 billion of liquidity into its top 5 banks because the second largest economy is concern it may be slowing. China is the largest copper consumer, putting copper back on my radar as an indicator of China (FXI, quote). Remember China accounts for 40% of the world’s consumption of the metal.
Even the big six currencies are in holding patterns ahead of the Fed.
Bottom Line – I want to see how the markets close today after the statement and testimony of on the hill.