Investing.com — A shift in sentiment in favor of a 50 basis point rate cut by the Federal Open Market Committee (FOMC) this week, instead of the expected 25 basis points (bps), could be bullish in the near term, say HSBC analysts said Monday.
However, expectations for overall rate cuts this year remain unchanged. HSBC economists still expect a 25 basis point cut.
In addition to the interest rate decision, the FOMC will also update its quarterly forecasts for real GDP growth, unemployment, inflation and policy rates. HSBC expects minimal changes to median projections for GDP growth and inflation, but unemployment forecasts could shift slightly.
They expect the FOMC to lower its median projection for the federal funds target range to 4.50-4.75% (from 5.00-5.25%) at the end of 2024, consistent with their forecast for 25 basis point cuts in September, November and December. .
For 2025, the bank expects the FOMC’s median projection for the federal funds range to decline to 3.75-4.00% (from 4.00-4.25%), in line with their forecast of another 75 basis points of interest rate cuts during the first three months. quarters of next year.
If the FOMC cuts rates by 25 basis points on Wednesday, it could bode well for the , especially with extended pricing for larger rate cuts already factored into markets and signs of excessive shorting in the USD.
“This would most likely weigh on gold,” analysts pointed out.
“Momentum in gold is up, but some technical indicators, such as the RSI, are outside the Bollinger Bands and are showing signs that the market is increasingly overbought. This leads us to believe that further gains for gold will be very difficult to achieve,” she added.
While Wednesday’s FOMC decision is the market’s main focus, several data releases this week could also impact gold, silver, and Platinum Group Metals (PGMs).
Key data to watch includes US retail sales, industrial production, housing starts, unemployment claims and the leading index, as well as the UK CPI and PPI, Bank of England decisions, Japan’s CPI and the UK retail sales.
