Negative real interest rates | 25 September 2020

Negative real interest rates


#WTI:


The warlord Khalifa Haftarl, who is fighting the UN-recognized government in Tripoli, had approved an end to the blockade of the country's oil installations. In theory, that could release up to 900,000 barrels a day of crude into the world market, based on what Libya was exporting before its civil war interrupted shipments. This is a negative signal for the oil market! The Saudi Arabian energy minister said those who gamble on oil prices would be hurt "like hell". Prince Abdulaziz had warned speculators not to "test the resolve" of the world's largest oil exporters, many of whom still need a higher oil price to balance their budgets. He also had harsh words for quota-busters such as the United Arab Emirates, and held out the possibility of an emergency meeting to decide deeper production cuts. This is a positive signal for the market.


Trading recommendation: range 40.00 - 42.50.


Negative real interest rates


#SP500:


Fed pledged to keep rates near zero until at least the end of 2023 when the labor market reaches "maximum employment" and inflation is on track to "moderately exceed" the 2% inflation target. Federal Reserve will increase its holdings of Treasury securities and agency mortgage-backed securities at least at the current pace to sustain smooth market functioning and help foster accommodative financial conditions, thereby supporting the flow of credit to households and businesses. This is a negative signal for the U.S. currency. This is a positive signal for the stock market!


Trading recommendation: range 3300 -33390.


Negative real interest rates


XAUUSD:


We are expecting a bullish rally in the gold market in the new five-day period. The US Federal Reserve has updated its macroeconomic forecasts and expects inflation to rise to 1.7% next year, promising to keep interest rates at 0.1% until 2024. Thus, the real negative interest rate in the United States next year will increase from the current level of 1.2% to 1.6%. This is a positive signal for gold, as real negative interest rates force investors to buy precious metals to protect their capital from rising inflation.


Trading recommendation: Buy 1947 and take profit 1960.

 

David Johnson
Analyst of «FreshForex» company
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