Week Ahead: Fed Rate Hike Looms as Global Market Volatility Rises
The upcoming week is shaping up to be one of the most consequential in recent history, with key interest rate announcements from the US Federal Reserve and Bank of Japan, as well as UK inflation figures.
Markets are pricing an 86% chance of a rate hike at this week's FOMC meeting, following recent hotter inflation data. A 25 bp increase is considered the base case.
The Fed's policy guidance at the post-meeting press conference will be closely watched, particularly by traders and investors holding gold. The metal has been trending upward, reaching $4,685 before retreating to around $4,350.
A confirmed hike combined with hawkish guidance from Chair Kevin Warsh could weigh on gold, potentially pushing it below support at $4,300 and exposing $3,700 as a possible target.
On the other hand, if gold holds the $4,350 area and the press conference tone comes across less hawkish than currently priced, prices could still attempt to retest recent highs near $4,685.