Metals steady after ‘pokerface’ FOMC statement

Otmane El Rhazi from The Bullion Desk.

Commodities prices barely moved after the Federal Reserve policy statement for July included no new information on when the next rate hike might happen.

Federal Open Market Committee (FOMC) policy statement said that the labor market continues to improve with “solid job gains and declining unemployment”, which was modest upgrade from the prior month’s release and could be viewed as mildly hawkish.

“Inflation continued to run below the committee’s longer-run objective, partly reflecting earlier declines in energy prices and decreasing prices of non-energy imports,” the FOMC added.

The members of the Fed’s policy board are locked in a debate on when will be the right time to raise rates, which have been near zero since December 2008. Since its decision is now entirely dependent on US data, a rate increase could happen at any future meeting.

“This is a pokerface statement from the Federal Reserve,” Steve Liesman, CNBC’s senior economics reporter, said. “If you are looking for that clue or hint that they are going to raise next meeting – it’s not in this statement.”

In testimony before Congress earlier this month, Yellen said that, if economy evolves expected, we expect, conditions likely would make it appropriate at some point this year to raise the federal funds rate target.

Nevertheless, the futures market are still sceptical that a rate hike will happen at the next meeting. The CME Group’s FedWatch puts the odds of a rate increase in September at just 19 percent and at 55 percent in December.

FedWatch is based on 30-Day Fed Funds futures prices, which have long been used to express the market’s views on the likelihood of changes in US monetary policy.

In the wider-markets, the dollar was 0.30 percent softer at 1.1029 against the euro, while the Dow Jones industrial average and S&P 500 were up 0.58 percent and 0.49 percent respectively.

Copper futures for September delivery was at $2.4025 per pound, essentially unchanged from the pre-Fed level, while Comex gold contract was at $1,095.80 per ounce, about $2 higher than before the statement was release.

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