Global Macro: This Week Was All About Rates
NEW YORK ( TheStreet) - The market's focus this week was on interest rates, which affected assets across the board from the U.S. dollar to gold. Oil, however, is still more influenced by geopolitical risks.
Minutes from the Federal Reserve's last Open Market Committee meeting, released on Wednesday, showed that although rates have spiked higher, the Fed has done ittle to push the market in the opposite direction.
That could be a signal that Fed members no longer desire to hedge their policy by taking one stance during official meetings and then quickly redirecting markets in the coming days. Analysts believe that indicates a September start date to slow down quantitative easing.
The first chart below is of the U.S dollar futures contract. The dollar had disregarded increasing rates over the past few months as investors sold bonds and the dollar on policy uncertainty. As the Fed's policy change has become more probable, investors have turned back to the fundamentals and resumed bidding dollars higher alongside higher rates.(UUP). Treasuries look to have room to move higher, which could be a positive or negative catalyst for the dollar. Watch for correlations between the price action for a more definitive answer. The next chart is of gold futures. As the U.S. dollar, Treasuries and U.S. equities have all sold off, gold has caught a bid higher. An ETF that closely follows the price of gold is SPDR Gold Shares (GLD). Gold broke out of its yearly downtrend and rushed to resistance at the $1,375 level. Now with U.S. assets likely to bounce off lows, money could come out of gold and push the price to below $1,300. (BNO), an ETF, closely follows the price. As investor fear has increased, so has the price of crude oil. The chart below shows a potential break higher as the tone of the region remains hostile. Follow @AndrewSachais This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.
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