Happy Monday, traders. I hope this preview is gentle enough to ease you through your green-tinged hangovers and into another week in the gold and currency markets.
Gold markets have kicked the week off with some healthy trading in the Sunday/overnight sessions, offering yellow metal at $1306/oz. After a mild sell-off at the Sunday evening open, gold looked likely to stay pinned around the $1299.50-level through the Asian session until strong buying stepped-in during the start of trading in London, re-breaking into $1300 and setting gold prices where we see them now.
This week’s economic lineup is much lighter than we saw over the last few weeks, thanks in part to our finally starting to catch up on the slew of economic data that has been withheld during January’s government shutdown. The sparse calendar only draws more weight and attention to Wednesday’s FOMC rate decision, expected to be unchanged, and the accompanying press conference and update to the Staff Economic Projections. Our list of broader macroeconomic developments to track away from specific calendar dates remains the same: progress made/lost in US-China trade talks, and the UK’s Brexit dramatics.
US Economic Data to Watch
Monday, March 18 at 10am EST //NAHB Housing Index (Mar)
[consensus expectation: 63 // previous: 62]
The NAHB provides this week’s most meaningful view of the US housing market, always an important leading indicator of the broader American economy. The Housing Market Index has shown two consecutive months of improvement after a December low, and analysts expect it to flatten out a bit in March. An upside surprise here could counter gold strength by putting some life in to a US Dollar what has started the week on the down-slope.
Wednesday, March 20 at 2pm EST // FOMC Rate Decision
[updated Staff Economic Projections; No policy changes expected]
Particularly after last week’s flat-ish inflation report, we see the odds of reinstatement of forward guidance (to say nothing of an actual rate hike) as firmly pegged close to zero. There will still be focus on the committee’s statement, in which we should get some more specific announcement about the timing of the end of the Fed’s balance sheet runoff. The FOMC will also release its quarterly update of Staff Economic Projections, which will give markets some view of what comes next. Of particular interest will be: the “dot plot” (projections for the timing and pace of hikes/cuts as seen by the individual members); GDP projections for 2019; and the committee’s estimates of where “neutral” rates lie—all expected to take a shift to the downside.
It’s always a little more alchemy than algebra to predict how metal and currency markets will react to what the Fed says rather than what the Fed does. That said, while the overall reaction may be muted I don’t see anything particularly positive for the US Dollar in the consensus predictions here and so I wouldn’t be surprised to see gold prices get a bit of a boost if everything delivers as expected on Wednesday.
My colleague Ryan Page will have a more in-depth preview posted ahead of the meeting.
Thursday, March 21 at 8:30am EST // Philadelphia Fed Manufacturing Index (Mar)
[consensus exp.: +6.0 // prev.: -4.1]
Even with the backdrop of weakness in other trackers of the US manufacturing sector, February’s 21-point drop in the Philly Fed’s Manufacturing Index was a wild outlier. The risks for the US Dollar are weighted more the to the downside than up (and vice-versa for gold price) as it would likely take a print near 15.0 to juice positive Dollar sentiment while anything below 5.0 could apply a strong headwind to the Greenback (and a buy-signal for gold.)
Thursday, March 21 at 8:30am EST // Initial Jobless Claims
[consensus exp.: +225k // prev.: +229k]
Looks like we’ve settled into a groove on Initial Claims for now, so we’ll just be keeping an eye out for any surprises. For now.
Friday, March 22 at 10am EST // Existing Home Sales (Feb)
[consensus exp.: +3.2% MoM // prev.: 1.2%]
Again, it’s tough to put a lot of stock into a “leading indicator” that’s being reported more than a month in arears. February’s Existing Sales should show growth from the prior month, but as with most of this catch-up data it would take a large beat or miss to stir the US Dollar (and its correlated markets,) especially on an otherwise quiet Friday.
Global Economic Data to Watch
Officially, Britain is still within 10 days of its deadline to crash out of the European Union with no deal though most expect an extension to be agreed to this week. Prime Minister Theresa May has set a deadline to parliament—Wednesday, March 20—to vote once more on her deal or else live with a longer-term extension of the Brexit deadline; at the time of writing this is still the case though word is growing that the PM is seriously considering pulling the vote. Should anything come of this in a way that effects metals or currency markets (we’ve been fooled before,) we’ll be sure to cover it.
Thursday, March 21 at 8am EST // Bank of England Rate Decision
[No policy changes expected]
With no change to the current easy-money policy expected, and for that matter no meaningful changes to forward guidance, broad-focus currency and metals traders after the meeting wraps will mostly be looking to BoE Governor Mark Carney’s statement and press conference for an update on the central bank’s assessment of their base case risks after a series of Brexit votes last week.
Friday, March 22 // Euro Ares PMIs
Investors and analysts across the spectrum, including the Fed’s own Jerome Powell, are beginning to more publicly acknowledge the risk that shakiness in Europe poses to the overall global economy. With that in mind, a lot of eyes will be on Friday’s series of manufacturing and service-sector PMIs covering the Euro Area as a whole, as well as the specific economies of Europe’s core: Germany and France. The hope is to see some further stabilization in the March numbers. A falter—particularly if Germany’s manufacturing sector were to fall farther into contractionary (sub-50.0) territory— could boost USD enough to put a dent in whatever position gold prices will have claimed post-FOMC.
Best of luck out there this week, traders. I’ll see you back here on Wednesday for a review of the FOMC meeting, and again on Friday for a look back at the week.