Yellen is Likely to Raise Interest Rates on Wednesday This Week..
Two important benchmarks are now within reach – the inflation target of 2%, and maximum employment. For the Federal Reserve Bank, these joint targets act as the barometer of the health of the US economy. Currently, the US unemployment rate for February 2017 is 4.7% – the lowest figure since December 2016. The US jobless rate plunged to 4.7%, from the forecast figure of 4.8% for February 2017. The total number of unemployed persons in the US remained unchanged at 7.5 million, while the LFPR (labour force participation rate) edged 0.1% higher to 63%. Among individual groups, the highest unemployment rate was with black people at 8.1%, followed by Hispanics at 5.6%, white people at 4.1%, and Asians at 3.4%. Overall though, these figures bode well for a tightening of monetary policy in the US. As a binary options trader, a falling unemployment rate (a move towards full employment) is associated with a robust economy, a strong USD, and a bullish Wall Street.
Currently, the inflation rate in the US (as at 15 February 2017) is 2.5%. This is the highest inflation rate in the US in years, and this is evident in the above chart which shows steadily increasing prices over time. Naturally, the Fed sees this as a green light for raising the federal funds rate (FFR) by 25-basis points when the FOMC meets on Tuesday/Wednesday this week. If the rate hike happens, the FFR will be 0.75% – 1.00%. The current probability of a rate hike this week is now at 88.6% – a slam-dunk in the opinions of economists and analysts. It is against this backdrop that we evaluate the top 4 trading assets this week and whether call or put options are appropriate.
Trading option #1 – Gold Continues to Slide
Multiple factors heavily influence the gold price, including the volatile European elections (notably France), and Brexit concerns. For example, in Dubai, the price of gold jewelry has plunged to its lowest level for 2017. This is due in no small part to the strong likelihood of a federal funds rate (FFR) increase this week. That gold bullion was trading around $1,200 per ounce earlier this year is some ways off its price of $1,300 per ounce in Q4 2016. Analysts are giving the precious metal a broad range of $1,100 per ounce on the low end to $1,300 per ounce on the high-end.
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