Gold Trims Strong Monthly Gains On Rate Hike Talk

The US stock market surged to another record high on Wednesday, driven more by “animal spirits” than solid economic data, and therefore appears to be in a blow-off phase.

Omair Sharif, senior U.S. economist at Societe Generale, says Dudley is considered to be part of the “core” FOMC along with Chair Janet Yellen and his comments sound like the committee is on board with a March hike.

Both Brent and WTI have traded above the $50 mark since the start of the year, but are showing little signs of an uptick to $60, as the upside risk of Opec production cuts and downside drag of rising U.S. production continue to cancel each other out.

“After being an important constraint in the past few years, the external environment now appears more benign than it has been for some time, even though risks remain”, Fed Governor Lael Brainard said Wednesday in an address at Harvard University. 1 meeting, the minutes showed.

Data showed US manufacturing expanded last month at the fastest pace in three years and an acceleration in German inflation added to signs of momentum in Europe’s largest economy.

The dollar was changing hands at Y114.05 at around 0250 GMT, coming off the earlier high. For the most part, however, companies were still waiting for Washington. Speaking to Santa Cruz business leaders, he maintained that the economy is strong and that an independent Federal Reserve has a critical role to play in protecting the stability of the nation’s recovery from the Great Recession. Increased risk appetite and some hawkish “Fed speak” are negatives for the gold market today. Things were so quiet that some Fed officials had turned to fretting about the lack of excitement.

The probability attached to a March rate hike rose to 52 per cent on Wednesday, up from 34 per cent a week earlier. As a result, the jobs report for February, which will released 10 March, will have an important, if not deterministic, influence on what the Fed does when its top policy-making committee next meets on 14-15 March. When CNN’s Richard Quest asked whether he was implying that a rate increase would come sooner rather than later, Dudley replied, “I think that’s fair”.

“The comments yesterday, particularly from Dudley, were a clear attempt to get the market discounting a March move”, said Altana currency fund manager Ian Gunner, in London. As a member of the Board of Governors, Ms. Brainard is a permanent voting member. Some officials see room for stronger economic growth to continue pulling people into the workforce: The share of American adults between 25 and 54 who are working or seeking work remains low by historical standards.

Or it could be some other kind of leak from the Fed? The financial media often quote the Bloomberg estimates, but they assume the federal funds rate always trades at the mid-point of the FOMC’s target band, now 0.625%.

Not all Fed watchers were so convinced.