[Market Morning] The Minutes of the Fed's Meeting Were Released, the Market's Interest Rate Hike Bets Cooled, and the U.S. Natural Gas Price "Breakthrough 9" for the First Time in 14 Years!
Concerned about whether the minutes of the meeting were further hawkish, the price of gold fell to around 1841.86 during the session on Wednesday, but the decline narrowed after the minutes of the meeting were released. Minutes of the meeting showed that the Fed was not considering a more aggressive pace of tightening, raising hopes that the Fed may pause its tightening policy later this year, which blocked the rebound of the dollar and provided support for gold prices. The US dollar index is currently trading around 102.03 and needs to beware of the risk of a resumption of the decline. The crude oil market remained volatile overnight, with U.S. crude currently trading at $110.88 per barrel.

Spot gold resumed its decline on Wednesday and once fell below the $1,850 mark during the session. After the minutes of the Fed meeting were released, it rose in the short-term, narrowing the intraday decline, and finally closed down 0.67% at $1,853.41 per ounce; spot silver first fell and then rose, and finally closed. It fell 0.44% to $21.99 an ounce.
Comment: Gold prices pared losses after the release of the Fed's meeting minutes, which did not mention raising interest rates at a more aggressive pace. Most Fed officials at this month's meeting believed the central bank needed to raise rates by 50 basis points at the next two meetings, which would give policymakers the flexibility to "shift gears" later if necessary. The dollar gave back some of its gains after the minutes, also supporting gold.
Suggestion: long spot gold 1853.70 positions, target point 1873.50.
The U.S. dollar index rose back above the 102 mark, pared back some of the gains during the U.S. session, and finally closed up 0.334% at 102.12. The yield on the 10-year U.S. Treasury bond fluctuated and stabilized, finally closing at 2.751%.
Comment: The dollar rose on Wednesday, holding on to most of its earlier gains after minutes from the Fed's May meeting showed that most participants believed a half-percentage-point rate hike in June and July might be appropriate. Minutes of the meeting released on Wednesday showed that all policymakers attending the Fed's May 3-4 policy meeting supported a 50 basis point rate hike to fight inflation. They agreed that inflation has emerged as a key threat to the performance of the U.S. economy and could climb further if the Federal Reserve does not act.
Suggestion: EUR/USD 1.06850 position to go long, target point 1.08100
In terms of international oil prices, the two oils traded in a narrow range. WTI crude oil touched a maximum of $111.63 per barrel in the day and finally closed up 0.39% at $110.71 per barrel; Brent crude oil finally closed up 0.62% at $114.37 per barrel.
Comment: Crude oil prices edged higher on Wednesday, helped by tight supplies, and as U.S. refiners boosted processing activity to the highest level since before the start of the coronavirus pandemic. Trip figures for the upcoming U.S. Memorial Day long weekend are expected to hit a two-year high, leading to higher fuel demand as more motorists hit the road despite pandemic restrictions despite high fuel prices.
Suggestion: long U.S. crude oil at 109.990, and the target point is 113.170.
The three major U.S. stock indexes fluctuated higher. The Dow closed up 0.6% at 32120.28 points; the S&P 500 closed up 0.95% at 3978.73 points; the Nasdaq closed up 1.51% at 11434.74 points. Chinese concept stocks generally rose, and Didi closed sharply up 18.24%.
Comment: U.S. stocks closed higher on Wednesday after minutes from the Federal Reserve's latest monetary policy meeting showed policymakers agreed that the U.S. economy is very strong and that the Fed is trying to control inflation without triggering a recession. The Fed raised its benchmark overnight interest rate by 50 basis points in May for the first time in more than 20 years. The minutes showed that "a majority of members" believed that further rate hikes of the same magnitude "may be appropriate" at the June and July policy meetings.
Suggestion: short S&P 500 index at 3975.500; the target point is 3853.640.
Fed minutes: sharp rate hikes will provide policy flexibility later this year.
The minutes of the Fed's meeting showed that most participants believed that 50 basis points for each rate hike could be appropriate at the next two meetings. A sharp rate hike would provide policy flexibility later this year. Fed researchers expect PCE to rise 4.3% in 2022 while lowering their forecast for next year to 2.5%.
CBO expects the U.S. budget deficit to fall in fiscal 2022; Fed will only raise interest rates to 1.9% this year.
The Congressional Budget Office (CBO) said the U.S. federal budget deficit would plummet to about $1 trillion this year due to surging tax revenue and the expiration of anti-epidemic relief programs while forecasting that by the end of 2022, the Federal Reserve will only reduce. The benchmark rate is raised to 1.9% (2.6% expected by the market) and to 2.6% by the end of 2023.
Market prices reflect heightened uncertainty over Fed rate hikes of 50 basis points each in the next two meetings.
On Wednesday, the Fed swap showed that the Fed would raise rates by a total of 98 basis points over the next two meetings, slightly less than 100 basis points, indicating increased uncertainty that the Fed will raise rates by 50 basis points at each of the two meetings in June and July.
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