As investors stood on the sidelines until the conclusion of the Trump-Kim summit in Singapore, all eyes turn to the Federal Reserve Policy meeting that kicks off on Tuesday.
As the Fed strives to continue to normalize monetary policy, experts predict Fed Chair Jerome Powell will announce a quarter point interest rate bump. According to the CME Fed Watch tool, there is a 91% chance the benchmark rate will be increased to a target of 175 – 200 bps. June’s rate hike will mark the second time the Feds raised rates in 2018. It’s widely expected that an additional bump will be announced in September, but the real question remains if a fourth increase will occur in 2018.
With inflation data tracking right at 2%, coupled with ultra-low unemployment rates and strong GDP forecasted for Q3, speculation surrounding a four rate bump year remains. However, the Trump Administrations stance on trade and the lingering ambiguity of a trade war with China, Canada and other allies could push Powell to pump the brakes.
Regardless of market sentiment around FOMC meetings, trading during pivotal news events can potentially trigger spikes in volatility. Thus, properly managing risk/reward is paramount.
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