FOMC Week Preview

What to Expect

Preface

There’s been considerable lack of harmony among the choir of voices in the rate hike discussion.

There are some like Goldman Sachs who say the FOMC will not deliver a rate increase at this week’s meeting, and that the path Beyond March comes with considerable uncertainty.

Others say the Fed’s primary interest is to squash inflation, so they’ll go ahead with a 50bps hike anyway.

And the rest are taking the happy medium of 25bps, by factoring in the bank liquidity situation as well as the risk of a hard landing.

Currently the Fed Funds futures odds are split roughly 60/40 between 25bps and 0. It’s been my view that there should be a pause this month, but the markets recovered at the end of last week, and that may sway the decision in favour of 25bps. A lot depends on what happens early this week imo.

Economic Calendar

Highlights

  • FOMC Rate Decision – Wednesday
  • Durable Goods Orders – Friday
  • Preliminary Manufacturing + Services PMI – Friday

Breakdown

FOMC Rate Decision – Wednesday

We’ve already talked about this in the opening, so no need to go in depth here. Instead I’ll give my assumptions based on possible outcomes.

0bps = market pumps

25bps = volatility but market likely continues upward

50bps = big pullback

Durable Goods Orders – Friday

Durable goods orders (goods meant to last at least three years) are expected to show a slight uptick in Feb after plunging in Jan. If instead the number comes in negative again, that should put more downward pressure on the US dollar.

Preliminary Manufacturing + Services PMI – Friday

The initial March reading is supposed to show manufacturing and services PMI numbers holding steady near the prior month levels. This is one of those data points where you look for a huge miss or beat to move the market in any meaningful way. An upside surprise could add to US dollar strength.

Bitcoin Event Study

There is a historical tendency for BTC to drop a few days after FOMC rate changes. This is quite notable and something we should be aware of as the risk aspect appears to have somewhat of a lagging affect on price. 

seasonax.com/events

Sponsors Corner

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https://twitter.com/TheTradingTank/status/1637360295437029377

Jay Charles

Editor in Chief, The Trading Tank.

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