The Fed is in its blackout period prior to the 1 Feb FOMC statement and interest rate hike. This week started with a prevailing uncertain sentiment.
Our top chart shows the US 10-year real rate and the bottom chart, FXCM's USDOLLAR basket. Last week Wednesday, the real rate declined off of poor retail sales and an industrial production miss. However, on Thursday and Friday, and prior to the blackout period, Fed officials pushed back on lower rates.
Fed Governor Brainard, on Thursday, maintained that interest rates need to remain high. However, Fed Governor Waller and Philadelphia Fed President Harker were more dovish on Friday, favouring a slower pace of hikes.
This ambiguity resulted in the real rate charting an uncertain spinning top, and the USDOLLAR an uncertain doji (red arrows). Markets closed almost unchanged for the week.
This has led to both charts opening inside last week's respective ranges (blue arrows). The markets are still deciding on direction. US Q4 GDP and the flash PMIs will be watched in anticipation.
Senior Market Specialist
Russell Shor joined FXCM in October 2017 as a Senior Market Specialist. He is a certified FMVA® and has an Honours Degree in Economics from the University of South Africa. Russell is a full member of the Society of Technical Analysts in the United Kingdom. With over 20 years of financial markets experience, his analysis is of a high standard and quality.