Next week is going to be a big one for binary options traders, and for good reason. We're getting closer and close to the September FOMC meeting, and with some leaders calling for higher rates and others calling for delays, it's definitely going to be a big market movement driver. Today, we'll talk about the recent comments made by key Federal Reserve members, what all of this has to do with market movement, and the assets that will likely lead to the best opportunities in the week ahead.
The Fed Is Clearly Undecided
We all know that the Federal Reserve has been planning on raising its rate at some point throughout the year. However, tough economic conditions have hindered these plans. Nonetheless, some investors believe that the Fed is going to move in the month of September while others believe that we will see more delays. This is largely caused by conflicting views among key members of the Federal Reserve. For example, Federal Reserve Governor, Daniel Tarullo does believe that gradual rate hikes are important, but he's not ready to move because inflation is still relatively low. On the other side of the equation, Boston Federal Reserve Bank President, and voting member on the Fed policy committee, Eric Rosengren believes that now is the time to act. Here's a bit of what they've each recently had to say. Read between the lines to see just how conflicting the two views really are…
“Over the last year … the unemployment rate has remained just about stable, while we've had about a million jobs above the replacement needs… Remember our mandate is maximum employment not some constructive view of full employment…” – Daniel Tarullo
“My personal view, based on data that we have received to date, is that a reasonable case can be made for continuing to pursue a gradual normalization of monetary policy… Because commercial real estate is widely held in the portfolios of leveraged institutions, commercial real estate cycles can amplify the impact of economic downturns as financial institutions need to write down the value of loans and cut back on lending to maintain their capital ratios.” Eric Rosengren
What Does This Have To Do With Financial Markets
At first glance, this news may seem purely political with little to do with the market. However, that notion couldn't be further from the truth. First and foremost, the United States is the world's largest economy. So naturally, anything that has an affect on the U.S. economy will likely lead to movement in the global economy. On top of that, there are several commodities priced using the USD. At the end of the day, when we talk Fed interest rates, we're actually talking more about the USD. When rates move the currency moves, and this can lead to massive fluctuations in the values of commodities, causing ripples in markets around the world.
What Assets Binary Options Traders Should Be Watching Closely In The Week Ahead
While the week ahead is likely to lead to incredible opportunities surrounding several assets, there are a few assets in particular across 2 asset classes that are likely to see the most movement. Here they are…
Commodities – First and foremost, as mentioned above, commodities are largely priced using the USD, and the USD is swayed by the Fed's rate. Naturally, this means that when there's movement in the USD, we'll see volatility in commodities. With the main discussion being the Fed's rate hike decision at the moment, we're likely to see big movement across this entire asset class in the week ahead.
USD Currency Pairs – Another big set of assets to watch is going to be USD currency pairs. With every news story leading to stronger opinions in one direction or another with regard to the Fed, we're likely to see big movement in the USD in the week ahead.
What Do You Think?
What assets will you be trading in the week ahead? Join the discussion in the comments below!
[Image Courtesy of Pixabay]