Did Fed Put Rate Hike in Play for June FOMC Meeting?
Today’s Spotlight Market
Following the release of the Fed minutes on Wednesday, traders appeared surprised by the rather hawkish tone coming from the voting members of the Federal Open Market Committee (FOMC), which was reflected quickly in the Fed Funds futures market. The probability of an interest rate hike at the June 15 FOMC meeting increased from 4% to over 30% following the release of the Fed minutes. While the Fed still appears to be ?data dependent? and any rate hike will be contingent on continued improvement in economic conditions, it appears that the Fed feels pretty good about the current pace of growth in the U.S. economy — or at least good enough to alert the ?market? that a rate hike is potentially on the table in June.? ?
Fundamentals
The Federal Reserve certainty threw market participants a curveball on Wednesday, as a release of the minutes from the April FOMC meeting showed that Fed officials were a bit more upbeat about the global economy than traders were. The biggest takeaway from the minutes was that an interest rate hike at the June 15 FOMC meeting is now potentially on the table when financial markets appeared to all but rule out this possibility previously. The reaction in the markets was swift, with equities staging a sell-off and bond yields increasing sharply in reaction to the release. Commodity markets also were impacted, especially Gold, which saw increased selling pressure emerge as the U.S. Dollar index rose to nearly 2-month highs. The heightened possibility of a rate hike as soon as next month will likely put increased investor scrutiny on upcoming economic data to help gauge the certainty that the Fed will initiate a rate hike as we head towards summer.
Technical Notes? -? View Today’s Chart
Looking at the daily chart for the June 2-year Note futures, we notice that prices are holding near the lower bounds of the recent price rage established back in mid-March. Prices did rebound slightly following the steep sell-off on Wednesday after the release of the April FOMC minutes. The 14-day RSI just missed reaching oversold levels prior to Thursday?s recovery but are still reading a rather weak 36.97 as of this writing. Major chart support is seen at the March 2016 lows of 108-23.75, with resistance seen at the February ?spike? highs of 109-24.50.???
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