Happy Tuesday traders, and welcome back from what I hope was a well-enjoyed long holiday weekend.
Even those of you who found some positive action in the holiday-shortened markets yesterday will be surprised to see gold spot markets trading this morning north of $1335/oz and clearing out high-marks going back to late April 2018.
While we’re not seeing the moves in other assets that typically correlate to such a strong move in gold (dollar is only mildly weaker, same goes for US equities at time of writing,) this price action does make for an interesting week ahead. Our economic calendar is on the sparse side, but the release of the minutes from the FOMC’s January meeting looms large on Wednesday afternoon while we’ll also be paying close attention to any concrete developments in the continuing trade talks between the US and China this week.
US Economic Data to Watch
Tuesday, February 19 at 10am EST // NAHB Housing Market Index (Feb)
[consensus expectation: 59.0 // previous: 58.0]
The Fed’s seeming adoption of a “wait and see” policy has forced the rest of us into one as well. As such, I think the US economy’s leading indicators, like housing data, will be important observational tools. The market expects a slight uptick this month, but essentially flat compared month-to-month. Honestly, I think even that one-point rise would be taken as an encouraging sign that the NAHB index number will continue to move off from the December lows and provide a benefit to US Dollar longs.
Wednesday, February 20 at 2pm EST // FOMC Meeting Minutes
Publication of the discussion minutes from the Fed’s January meeting is the big focus this week. As you’ll recall, the result of the meeting was beyond even the most dovish of realistic expectations. Because of that, it seems unlikely there could be much shock value left to come from a closer look at the minutes—but never say never. In terms of specific discussions, the market will be looking to see how cohesive the committee was on decisions to alter the statement in regard to the outlook on inflation and to publish an addendum specifically addressing plans for balance sheet runoff. Equally important, I think, will be any insight into the decision to remove forward guidance from the statement.
In terms of the gold market, I think any evidence that there was marked push-back from the more hawkish committee members over changes to the statement would indicate that the “Fed pause” might be tenuous and more likely to lead into another rate hike, an environment that would apply some downward pressure to gold prices. On the other hand, if the meeting minutes paint the picture of a committee all too eager to take a dovish tilt then we may see another bullish impulse for gold markets similar—albeit smaller—to price action in the wake of the January statement and press conference.
Thursday, February 21 at 8:30am EST // Durable Goods (Dec)
[consensus exp.: +1.5% MoM //prev.: +0.8%]
Continuing to catch up on some of the data that was delayed during the government shutdown, the growth in Durable Goods Orders is expected to look a little healthier month-over-month as aircraft orders, which has been a heavy anchor in recent months, seem to have picked up to a healthier level.
Thursday, February 21 at 8:30am EST // Initial Jobless Claims
[consensus exp.: +230k // prev.: +239k]
With the four-week average in jobless claims reaching a new 12-month high with last week’s number, we’ll continue watching the trend here for indications of labor market health.
Thursday, February 21 at 8:30am EST // Philadelphia Fed Manufacturing Index (Feb)
[consensus exp.: +14.5 // prev.: +17.0]
While the most recent measures of manufacturing growth in the US have just hinted at a rebound, I’m inclined to argue that the slowdown will persist at least a while longer; the broad market expectations of another drop in the Philly fed’s index would support that view and put some pressure on US Dollar value.
Thursday, February 21 at 10am EST // Existing Home Sales (Jan)
[consensus exp.: +0.2% MoM // prev.: -6.4%]
Similar to the NAHB index to start this week, in the search for a confidence-confirming forward indicator of a healthy American economy, Dollar markets will likely cheer a home sales report that’s simply not-negative rather than demanding an objectively positive report.
Friday, February 22 // Fed Speak
Hot on the heels of the January FOMC meeting minutes, which may or may not demand some further explanation, we have a slew of public remarks from Fed members both voting and non-voting on Friday:
- Atlanta Fed President Raphael Bostic at 8:15am EST
- New York Fed President John Williams at 10:15am EST
- FOMC Vice Chairman Richard Clarida at 12pm EST
- FOMC Vice Chairman Randal Quarles at 1:30pm EST
- St. Louis Fed President James Bullard at 1:30pm EST
- Philadelphia Fed President Patrick Harker at 1:30pm EST
Each FOMC member is on the docket to either deliver remarks or participate in a Q&A focused on many topics about which investors are currently working to discern the committee’s views, like macroeconomic conditions looking ahead, and the state of the Fed’s balance sheet.
And that’s your week ahead, traders. With some signs of continuing—and concerning—weakness in the core of the European Union economy (namely Germany,) I’ll also be tracking the Euro Area PMI reports delivered this week for the next developments in that trend, but I don’t feel like it warrants a spot on a dedicated gold trader’s radar until the situation deteriorates further. Should that change (or any other relevant macroeconomic situations develop!) I’ll be sure to discuss it during our detailed wrap up at the end of the week.
Until then, good luck out there.