Yesterday, investors could have waited the whole day for the publication of the minutes of the last FOMC meeting, where they wanted to find out more about the tapering date and the timing of interest rate increases in the USA. In a way, they got the answer.
The published minutes showed that the members of the Federal Reserve agreed on tapering the asset purchase program, which they believe should start in mid-November or mid-December. Policymakers emphasized that if the economic recovery continues, a gradual tapering process ending around the middle of next year would likely be appropriate. Participants at the FOMC meeting also considered a sample tapering path that included monthly reductions in the pace of asset purchases of $10 billion for Treasury securities and $5 billion for agency mortgage-backed securities (MBS). At its September meeting, the Fed also left the corridor for the key interest rate unchanged at 0-0.25 percent, and bond purchases remained conducted at a pace of $120 billion per month.
However, investors did not find out when the first interest rate hikes might occur. As recently as yesterday, it was estimated that the first hike would take place in September 2022, while earlier estimates were for December 2022. Currently, therefore, in the absence of concrete information on the matter, the interest rate market may have shifted its expectations again, which in turn could hit the US dollar.
Dollar with the biggest daily loss in over a month
As Bloomberg reported yesterday, after the publication of the minutes the US dollar began to lose value on a scale that we may not have seen in over a month. EUR/USD quickly returned to the region of 1.1600 from 1.1525.
The weakness of the dollar may have helped gold and silver quotations. Here, the publication of information on inflation could also have been a supportive factor. More and more data indicate that it is not temporary, as previously assumed.
Gold rose to around USD 1,800 per ounce and is the most expensive since mid-September. Silver, meanwhile, has surpassed $23 and has also climbed to levels last seen a month ago. In the face of high inflation and potential stagflation in some parts of the world, precious metals may return to the favour of investors.
Daniel Kostecki, Conotoxia Ltd. (Forex service)
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