Recent comments by Fed officials have reiterated the need to continue hiking rates until they reach at least 5% and a slew of data has pointed in that direction in general. ”Several regional Fed presidents have indicated openness to higher interest rates and larger increases if the data remain strong. It would mark a shift in the Fed’s guidance if Powell articulates similar sentiments at tomorrow’s testimony and a step back from the cautious policy around rates,”.
Inflation
”Recent strength in Nonfarm Payrolls and Retail Sales data argue that policy is not restrictive enough, and the Fed may have been wrong-footed by soft Q4 data. The Fed might be well served in emphasizing the importance of short-term inflation expectations and current inflation in its estimates of restrictiveness,” the analysts added.
Nonfarm Payrolls Data
Meanwhile, the Nonfarm Payrolls data will be focal given many Fed members are looking for a cooling in jobs following the hot January numbers of over 500k new jobs. However, if jobs don’t cool sufficiently enough, the markets will likely see that has the green light for a 50bp hike at the March FOMC meeting which would be expected to weigh heavily on the Gold price. ”A return to CTA selling could be in the cards as prices still flirt with a break below the 200dma and key $1,797/oz mark,” analysts.
