• Commodity prices fell in pre-positioning for the FOMC[1] rate decision
  • Crude oil price range holds but gold seems to have broken downward
  • Markets may be primed for a more hawkish Fed tone than is realistic

Worries about an accelerated pace of Fed interest rate hikes seemed to define price action benchmark commodities. Crude oil and gold prices tracked lower alongside bellwether S&P 500[2] futures while the US Dollar rallied[3] and the priced-in 2018 rate hike path implied in Fed Funds futures steepened.

The cycle-sensitive WTI contract faced dual headwinds, with fears that aggressive tightening will go too far in cooling economic activity compounded by de-facto selling pressure since prices are denominated in USD[4] terms on global markets. The yellow metal suffered amid the ebbing appeal of anti-fiat alternatives.


Needless to say, all eyes now turn to the FOMC policy announcement, where traders will look for official rhetoric to ratify the hawkish shift in baseline forecasts[5] over the past two weeks. If Chair Powell and company deliver accordingly, commodities are set to suffer further.

Two weeks of aggressive repositioning might have markets primed for a more assertive stance than policymakers are prepared to hazard. That may translate into a bit of disappointed divestment from the “hawkish Fed” narrative, which might allow commodities a bit of a recovery in the near term.

Elsewhere on the docket, EIA inventory data is expected to show a meager inflow of 840.5k barrels last week. An API

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