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CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 71% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

71% of retail investor accounts lose money when trading CFDs with this provider.

Market Insights

US Fed preview June: Hey Fed, it’s all good, keep the rate

FED EN

US Federal Reserve (Fed) Interest Rate Decision- Fed date: Wednesday, 14 June 2023, Time: 6:00 PM UTC

Hey Fed, it’s all good, keep the rate

The chart illustrates the year to date percentage performance of the US 100 Index, US M2 Money Supply, and PCE Core Inflation.

  • Year to date US 100 Index has gained 34%
  • US Money Supply (M2) has dropped -3%. Higher interest rates lead to removing liquidity from the system, thereby helping to push down inflation.
  • Core PCE Inflation has ticked higher recently, although it remains down -0.63% year to date
United States Indicators Year to date %
US Dollar Index 0.58%
SPX500 Index 10.62%
Unemployment rate 3.7%
Inflation rate y/y 4.9%
Interest rate 5.25%
Annual GDP growth rate 1.3%
Wage growth 5.58%

The Fed should pause but keep the door open

Key US Economic Indicators look very well balanced

  • Not too strong US Dollar
  • Robust stock market
  • Low unemployment
  • Inflation remains above Fed target but moving in the right direction
  • Interest rate normalization
  • Positive GDP growth
  • Wage growth is now well above inflation

Source: Tradingview as of June 12 2023 5:43 UTC

What could be on the Fed’s mind?

Mixed US Jobs Data

  • The US created 339,000 jobs in May
  • The latest US unemployment data suggest that unemployment is at its highest in six months

Attention Traders!

Never trade on what you think the Fed should do, trade on what you think they will do! The US Fed is very likely to hold off any rate hike during June, but…

The Fed is likely to give some serious consideration to hiking in July

  • Current inflation is 4.9%, their target is 2% over the long term
  • Unemployment is 3.7%, unemployment is near 60 year lows

The Fed aims to achieve maximum employment, which it has already achieved, and inflation at 2% over the longer run.

Since the Fed is near to both targets it's more or less likely that they will want to signal to the markets that they are shifting towards a more “neutral” interest rate position.

Bottom line: The Fed seems to have done a great job getting the US economy to arrive at the current balance of neither too hot nor too cold.

Technical Commentary

US 100 Index: Bullish conditions

US 100 Index: Current price 14,600. Long positions above 14,180 for potential upside move towards 15,480 could be technically supported; downside risk see below the 14,180s (see weekly chart).

10-year US Bond: vulnerable toward the downside

10-Year US Bond: Current price 113.23. Short positions could be technically supported for downside extension toward the 107.30s. Upside risk above the 114.08 resistance could put 115.025 in sight.

This week's US Fed interest rate decision could signal to traders and investors that, for the moment, we could be living in an economic golden period.

Happy trading.

Not investment advice. Past performance does not guarantee or predict future performance.