StoneX: Markets are overestimating Federal Reserve rate hike risks

Rhona O'Connell, StoneX’s head of market analysis for EMEA and Asia, suggests that the market’s reaction to June’s consumer price index is misguided. She notes that 90% of that decline stemmed from falling energy prices, which have since recovered. Despite the noise surrounding a potential July hike, O'Connell expects the FOMC to hold rates steady while maintaining a hawkish rhetorical stance to manage market sentiment.

This skepticism toward aggressive tightening extends to the precious metals sector. StoneX strategists Kathryn Rooney Vera and Jon Hilsenrath point out that futures markets are miscalculating both the speed and frequency of future moves under new central bank leadership. They argue that for current market expectations to hold true, inflation data would need to stagnate or deteriorate significantly through the end of the year, a scenario they view as unlikely. Consequently, gold and silver are expected to remain trapped in narrow trading ranges with a persistent downward bias, weighed down by a 10-year yield currently holding at 4.3%.