All markets are on their toes, awaiting the Federal Reserve's meeting on Wednesday.
But the irony is that it's not the decision itself that's moving the market... but rather the "talk after the decision"!
While most expectations point to a hold on interest rates, what matters to traders and investors is the tone of the speech following the meeting:
Will the Fed hint at a rate cut in the coming period?
Or will it maintain its hawkish stance due to fears of inflation?
QCP Capital noted that the market has recently been reassured by:
1. The release of good economic data
2. The easing of tensions in the trade dispute between the US and China
But the surprise today was Trump's statement:
"I won't be speaking to the Chinese president this week."
A small statement, but it means a lot to investors:
No immediate calm = Escalation fears = Return of inflation = No interest rate cut imminent
This means the Fed is under tremendous pressure:
Trump wants lower interest rates
The economy is volatile
The trade dispute is playing with fire
Will the Fed hold firm? Or will it gradually ease?
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