Fed Chair Janet Yellen said last month the case for rate increases was firming but did not say when such a move could happen, and other policymakers have urged more caution about rate hikes.
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So if you, like Hatzius, believe the Fed should and will raise rates next month, expect Fed officials to start taking to the podiums and airwaves in force this week to try to convince markets they mean business.
Sterling, which topped $1.34 for the first time in seven weeks on Tuesday after the ISM data, pulled back 0.5 percent to $1.3376 after British manufacturing output fell 0.9 percent in July, its biggest drop in a year.
The Federal Reserve was expected this year to raise rates up to three times. Williams said he expected slower rate hikes now than he did a year ago largely because he believed low productivity growth and an ageing population had slowed the potential rate of economic growth in the U.S. to just 1.5%-1.75% a year.
Now Trump is blaming the Fed for creating a “false economy” with its emphasis on extremely low interest rates.
That’s being reflected in a falling USA dollar, he said. Later this month, the central bank will decide whether the USA economy is healthy enough to handle the second interest rate hike since the Great Recession.
The services data “suggest that the market will be tipping towards no Fed hike in September”, said Aaron Kohli, a fixed-income strategist at BMO Capital Markets in NY.
This time is different from past year when the Fed’s dots predicted that the Fed would follow the December hike with four more 25bp steps in 2016 and the market was pricing in two to three rate adjustments. Shorter maturities will lead gains until “we get either a Fed speaker or additional data to counteract that view”.
Gold and silver prices gained sharply on Wednesday tracking global cues and heavy buying by Indian jewellers, adding to the bullish sentiments prevailing on the stock markets.
“I don’t think most people are uncertain that the Fed is going to hike, that is pretty well established”, Eliasson said. It tumbled more than 1 percent against its Japanese counterpart on Tuesday.
Japan’s Nikkei index, however, retreated 0.4 percent as a strong yen hurt exporters.
On the Shanghai Futures Exchange, gold for December delivery was last unchanged at 290.75 yuan per gram, and the December silver was flat at 4,429 yuan per kilogram.
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Spot gold was up 0.2 per cent at $1,351.51 per ounce by 0427 GMT. Because of the U.S. Labor Day holiday, electronic transactions from Monday were booked with Tuesday’s for settlement purposes. Morgan Stanley strategists led by Matthew Hornbach say they are staying bullish on government bonds on the view that continued slack in the USA labor market and an absence of inflationary pressures will stay the central bank’s hand.
