In the name of God, the Most Gracious, the Most Merciful, and may blessings and peace be upon the most honorable of the prophets and messengers, our master Muhammad, and upon all his family and companions.
The recent US Federal Reserve meeting will have an impact on gold and other assets in the medium term because this meeting was decided at the beginning of the last quarter of 2023 and is considered a radical shift in the course of monetary policy.
Therefore, in this report, we will explain the behavior of the dollar in the coming period and its impact on oil and American indices, as well as its impact on other foreign currencies.
First we must get to know
summary :
The meeting came without any surprises, as the markets had expected
– Fixing the interest rate at its highest level since 2006 at 5.50%, while leaving the possibility of only one hike before the end of the year, which may be in the November meeting or the December meeting.
As for economic expectations:
the growth:
Raising forecasts for real GDP growth from 1% to 2.1% in 2023
He also raised his GDP growth forecast from 1.1% to 1.5% in 2024
The Fed described growth as strong instead of what it described in previous meetings as moderate.
Labor market:
Reducing unemployment expectations from 4.1% to 3.8% in 2023 and from 4.5% to 4.1% in 2024.
The Fed described employment as declining instead of what was strong in previous meetings, but continued to describe employment as still strong
Inflation:
He raised his forecast for the inflation rate from 3.2% to 3.3% in 2023, while lowering his forecast for the core inflation rate excluding food and energy from 3.9% to 3.7% in 2023.
This indicates that inflation is high due to rising energy prices
Our analysis of this data:
The American economy is characterized by strength and expectations are that it will remain strong with attempts to weaken the American labor market. The step that the Fed will focus on in its fight against inflation is weakening the labor market as a main tool and alternative to interest rates.
Interest is a major and direct tool
– The labor market is an indirect alternative tool
Interest expectations:
These are the expectations of members of the US Federal Reserve for the path of interest rates during the coming period, according to the Dot Plot Chart.
12 Fed members expect interest rates to rise again in November or December 2023, including 7 members who expect interest rates to continue to be fixed.
Interest rates in 2024, instead of what was expected to be reduced by 100 basis points, it is now expected that the reduction will be only 50 basis points, and instead of 3 to 4 times the reduction, perhaps the reduction next year will be from one to two times, and this undoubtedly reduces the stimulation of risk appetite. .
Summary of Jerome Powell’s conference – Stabilizing the interest rate may be for a longer period of time until inflation reaches the Federal Reserve’s 2% target, with the need to obtain economic data that shows further progress.
There may be one interest rate hike before the end of 2023
Fixing the interest rate in September does not mean that interest rates have reached their peak. “It means that the door is still open to raising the interest rate if necessary.”
The conclusion means: – We have entered a new phase from raising the interest rate to stabilizing the interest rate for a long period of time, with the possibility of raising the interest rate remaining only if necessary.
– When Jerome Powell was asked about when the interest rate reduction would begin, his reaction was very intelligent that he did not want to send any signals at the present time regarding reducing the interest rate and that there was a state of uncertainty regarding the interest rate reduction.
He said that American economic growth exceeded expectations, and that members of the Reserve Board raised growth expectations for the years 2023 and 2024.
When Jerome Powell was asked about the rise, he said that it is not important that it rise, but what is more important is that it does not rise for a long period of time because it may affect inflation.
Our expectations for the dollar:
Perhaps the US dollar had a pre-emptive movement in what it priced in advance of the Federal Reserve meeting, which was largely consistent with expectations and did not bring anything new, but rather confirmed what we expected that we are in a new phase of monetary policy by stabilizing the interest rate for a longer period of time. Therefore, I see that the dollar will follow a horizontal direction for some time. Time in the medium term, which was explained in the pictorial report attached to the report
However, in smaller time frames, the dollar was following an upward trend as a pre-emptive reaction to what happened at the Fed meeting, and therefore I expect that the dollar will enter a profit-taking phase and correct downward.
Our expectations for gold:
The Federal Reserve meeting came largely with the same expectations and the impact appeared on the dollar proactively, so it is expected that we will see profit-taking operations for the dollar after the strong rise and a corrective decline, and it will serve as an opportunity for gold to rise, as it is expected to rise as a result of the weakness of the dollar despite its lack of any other factors that enhance its rise.
Our foreign exchange forecasts:
The US dollar will be less strong against commodity currencies such as CAD – AUD – NZD
Our expectations against the US dollar:
– Britain has a decline in inflation with a decline in some economic sectors, with it fixing the interest rate at its last meeting, so it is expected that the US dollar will be stronger than the pound sterling in the medium term.
– Also, the Eurozone has a decline in inflation with fears of a contraction in economic growth due to Germany suffering from the current crisis, especially with the return of rising oil prices. Also, the interest rate was raised by 25 basis points at the last European Central Bank meeting this month, so it is It is expected that the US dollar will be stronger than the euro in the medium term
Our oil forecast:
There is no doubt that oil prices have a major role in the return of the economic recovery and the extent of the markets’ optimism about economic growth, but the return of fears of a decline in economic growth in the Eurozone, as well as in Britain, with the US interest rate being fixed for quite a while, which may disrupt risk appetite. Therefore, this is reflected in oil with the return of fears of a decline. Global demand may see profit taking on oil at levels of approximately $86 per barrel for Brent crude
In addition, after oil continued to rise in the previous period until it reached levels higher than $95 per barrel, it is possible that we will be facing expected profit-taking operations.
With this, we have presented to you a comprehensive and comprehensive report on the markets during the coming period and our expectations for other assets against the dollar, in addition to attaching a comprehensive video report of economic analysis and technical analysis in one video. I hope you like it.
Please accept my regards
Dr.. Muhammad Al-Ghobari
2023-09-26 20:33:00
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