Today was all about the FOMC. The announcement however, turned out to be somewhat of a non-event. The fed essentially came out and did what everyone expected them to do. They intend to continue their current path on interest rates and they plan on continuing their bond buying program.
There were some notable language changes in today’s statement however. The Fed has indicated it has flexibility in its bond buying program, and it will monitor economic developments. The bond purchases could be increased or decreased at any time. Just hearing that makes many investors confused-and who can blame them?
These past few months have seen talk of the Fed removing stimulus measures, yet now the potential for increased asset purchases is on the table. This would seem to suggest that the economy remains in a very fragile state, and that it likely cannot sustain itself without the Fed’s help. It is hard to imagine the fed removing the punchbowl when the data has been softening up quite a bit and the labor market remains very questionable. So it would seem that existing stimulus is here to stay for now, if not even more stimulus.
Today’s FOMC rate decision was one of three potentially market moving events this week for the markets. Tomorrow morning, the ECB will make its rate decision. It is widely expected that the ECB will cut rates in an effort to boost their economy which is apparently getting slower by the day. Because this is expected, the effect on the Euro may be very little.
On the other hand, if there are any surprises or if more drastic measures are taken, the Euro could get hit hard thus boosting the dollar. This potential dollar strength could weigh on silver prices. On Friday, the markets will see the April non-farm payrolls numbers. This report was a big miss last month-and a big miss this month could trigger selling in risk assets and potentially boost the appeal of silver.
Silver prices do look a bit precarious here. After stabilizing following the plunge down to the $21 area, silver has been able to put together a rally off those lows. In fact, after trading sideways in the $23 area for several sessions, the market broke out to the upside and traded as high as $24.83ish. That high was made on Friday, and thus far this week the market has lost ground. It is important for silver to see some upside here the rest of the week, and if not the likelihood of renewed selling pressure increases dramatically.