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Control group retail sales, the more accurate gauge to measure consumer spending, matched the 0.30% forecast, while July’s data was revised higher from 0.30% to 0.40 %. Industrial production rose 0.90 percent in August (0.20 percent forecast), as the NAHB Housing Market Index (September) was in line with the 41 forecast.

Upcoming dates and events: The US FOMC’s monetary policy decision to be announced tonight at 11:30 PM IST is the most important decision for the markets as the Central Bank is set to begin its easing cycle. Although economists are predicting a 25 bps hike, markets are also discounting the possibility of a 50 bps rate cut. As the Wall Street Journal reported a few days ago, members of the US Fed are debating whether to opt for a 25 or 50 basis points per second cut. This uncertainty is somewhat unusual because the Fed always believes in clear and well-telegraphed decisions in its communications.

It should be noted that the probability of a 50 bps cut was not affected by the retail sales and industrial production data as it is around 63%.

In addition to the FOMC’s monetary policy decision, markets will also be looking at US housing starts (August).

US yields and the dollar: higher

US yields were slightly firmer on an encouraging set of US data. Ten-year US yields were seen at 3.65%, up about 0.75% on the day, while two-year yields at 3.59% were up more than 1%.

The US dollar index at 100.99 was up 0.22% on the day.

ETFs: Admissions at highest level since mid-February

As of September 16, total known gold ETF holdings stood at 83.243 MOz, the highest level since mid-February.

Interest for BRICS: A TASS report quoted Russian President Vladimir Putin as saying that up to 34 countries are looking to join the BRIC amid efforts to de-dollarize. The BRIC Summit will take place on October 22-24 in Kazan, Russia.

Outlook: Adequate risk management is recommended to minimize US risk The Fed’s policy decision

While the outlook for gold remains positive on central bank buying, geopolitical concerns, deteriorating US fiscal health, rising global debt-to-GDP ratio, concerns about the Chinese economy, the possibility of a US recession as the labor market weakens and yields fall as the global economy struggles, the near-term outlook will depend heavily on US Fed policy. Although economists expect the Fed to begin its rate cut cycle by 25 basis points this evening, markets are ruling out the possibility of a 50 basis point cut. Markets currently assign a probability of about 0.63 that the Fed will cut rates by 50 bps. Such uncertainty is quite unusual because the Fed does not like to surprise the markets.

First publication: September 18, 2024 | 10:25 AM IST