Olivia

And there we have it. This week will see January in the books, and what a week it promises to be. Not only do the Fed and the Bank of England (BoE) claim the central bank spotlight—both of which are anticipated to hold the line—plenty of macro market movers will grace the economic calendar throughout the week. Robust US economy According to the first estimate for US GDP for Q4, economic activity remains resilient. Real GDP rose more than expected at an annualised rate of 3.3%, tearing through the median estimate of 2.0% (down from 4.9% in Q3). Adding to this, manufacturing and services PMIs are now both in expansionary territory (> 50.00). Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, commented: ‘Confidence has also been buoyed by hopes of lower inflation in 2024, easing the cost-of-living squeeze and facilitating the path to lower interest rates. With prices rising in January at the slowest rate since the initial pandemic lockdowns of early 2020, companies report that selling price inflation is now below the pre-pandemic average and consistent with consumer price inflation dropping below the Fed’s 2% target’. With US consumers clearly gaining confidence (as per the University of… Read More »Week ahead: What are the markets watching this week?

Gold price tests bearish commitments near $2,030 on the renewed upside. Further Middle East geopolitical escalation underpins Gold price in the Fed week. Gold price rebound could be limited amid daily bearish technical indicators.   Gold price is back in the green early Monday, having posted two straight weekly losses. Gold price is staging a modest rebound, courtesy of the further escalation intensifying in the geopolitical tensions between the Middle East and the United States (US). Geopolitical risks intensify in the Federal Reserve week Investors set off the critical week, including the US Federal Reserve (Fed) policy announcements, on a cautious footing after a Reuters report quoted US President Joe Biden and officials stating that three US service members were killed and dozens may be wounded after an unmanned aerial drone attack on US forces stationed in northeastern Jordan near the Syrian border. Biden said, “while we are still gathering the facts of this attack, we know it was carried out by radical Iran-backed militant groups operating in Syria and Iraq.” “Have no doubt – we will hold all those responsible to account at a time and in a manner of our choosing,” he added. Markets remain wary of the… Read More »Gold Price Forecast: XAU/USD recovery could be limited ahead of the Fed announcement

In what is anticipated to be an exceedingly hectic macro meets mega-cap tech period for markets, the last thing investors needed to deal with was another significant Middle East Flash Point. The ongoing conflict between Israel and Hamas has the potential to escalate into a more significant regional and international crisis. Three U.S. service members were killed, and dozens may be wounded after an unmanned aerial drone attack on U.S. forces stationed in northeastern Jordan near the Syrian border, President Joe Biden and U.S. officials said on Sunday. Biden blamed Iran-backed groups for the attack, the first deadly strike against U.S. forces since the Israel-Hamas war erupted in October and sent shock waves throughout the Middle East. Reuters Sunday’s incident marked a significant escalation in the ongoing conflict, occurring shortly after Kataib Hezbollah’s aggressive assault on the Al Asad Air Base in Iraq, which resulted in evaluations for brain damage among American soldiers and support personnel. In response, the U.S. military, under Lloyd Austin’s leadership, carried out what they termed as “necessary and proportionate strikes” on three facilities as a retaliatory measure. President Biden condemned the drone attack as “despicable” and reaffirmed America’s commitment to honouring fallen soldiers and holding those… Read More »War drums beat at the Asia open

Despite generous economic data last week, the US Dollar Index was tiresome. The week settled marginally higher, adding +0.2%, but it barely scratched out a fresh higher high and largely remained within the previous range (check weekly chart). Monthly chart: Technical observations on the monthly timeframe are largely unchanged from previous writing (and will likely remain so in Q1). You may recall from previous writing that the FP Markets Research Team aired the following (italics): Structures worth monitoring are support at 99.67 (backed up by a moderate Fibonacci cluster nearby at 98.72) and October’s (2023) peak at 107.35 as a possible resistance, with a breach here exposing another layer of resistance at 109.33. It is important to underline that the monthly timeframe displays a clear view of the longer-term trend, which, despite lacklustre movement since early 2023, is north alongside momentum remaining just above positive (> 50.00), as per the Relative Strength Index (RSI). Daily chart: Resistance at 103.62 on the daily timeframe has seen its fair share of upside attempts in recent trading; this horizontal base shares space with the 200-day simple moving average (SMA) at 103.50. Equally interesting is support at 102.92 on the daily chart, a base… Read More »Rangebound conditions for the US Dollar

The European Central Bank maintained its monetary policy unchanged, sounding mostly dovish. The United States Federal Reserve will announce its decision on monetary policy next week. EUR/USD keeps signaling a bearish breakout, but investors remain cautious. The US Dollar was the overall winner this past week, with EUR/USD falling towards the 1.0800 mark on Friday. A slew of United States (US) macroeconomic data and the European Central Bank (ECB) monetary policy announcement were behind the pair’s decline.  Investors started the week with optimism, as the earning season in the US reflected the country’s economic resilience. Most big names reported better-than-expected results, leading to record highs on Wall Street. The upbeat tone of equities and the absence of relevant macroeconomic releases throughout the first half of the week limited demand for the USD and kept major pairs within familiar levels. Clearer clues emerged Optimism persisted, but the US Dollar surged on Thursday following the release of the preliminary estimate of the Q4 Gross Domestic Product (GDP). The Bureau of Economic Analysis (BEA) reported that the economy grew at an annualized pace of 3.3% in the three months to December, much better than the 2% anticipated. Furthermore, the Core Personal Consumption Expenditures… Read More »EUR/USD Weekly Forecast: The world rotates around rate-cut odds

–       GBP/USD kept an erratic performance in place throughout this week. –       Firm flash PMIs provided some colour to the British pound in past days. –       The BoE is largely expected to keep rates unchanged. It was a fairly choppy week for the British pound, which prompted GBP/USD to maintain its consolidative fashion between 1.2600 and 1.2800. Dollar dynamics ruled sentiment in the past week Despite the ongoing choppiness, GBP/USD remained at the mercy of the developments gyrating around the Greenback, which has also been moving within a range-bound trade when gauged by the USD Index (DXY). Among the bright spots supporting a constructive bias for the Pound  Sterling (GBP) an auspicious reading emerged from advanced PMIs for the current month, which improved from the December’s prints in both the manufacturing and the services sectors. Adding to the above, there were also positive surprises from the Public Sector finances results and Consumer Confidence tracked by GfK. Somewhat eclipsing that data emerged worsening figures from the Consortium of British Industry (CBI) Industrial Trends Orders and CBI Distributive Trades Survey. The BoE and the Fed steal the show next week With the BoJ and the ECB… Read More »GBP/USD Weekly Forecast: BoE could put the consolidative phase to the test

Gold continued to move up and down in a relatively tight range above $2,000. The near-term technical outlook highlights XAU/USD’s indecisiveness. Fed policy announcements and US jobs data will be watched closely by investors next week.  Gold struggled to find direction and closed the week little changed. Although the US Dollar (USD) benefited from some upbeat data releases, escalating geopolitical tensions helped XAU/USD hold its ground. The Federal Reserve’s (Fed) first policy meeting of the year and January jobs data from the US could significantly impact Gold’s valuation next week. Gold price moved sideways this week Gold edged higher to start the week as the improving risk mood made it difficult for the USD to find demand in the absence of high-tier data releases. A Bloomberg report claiming that China was considering an equity market rescue package worth about 27 billion USD triggered a rally in global equity indexes. On Tuesday, Gold failed to build on Monday’s gains, while the benchmark 10-year US Treasury bond yield held steady above 4%. S&P Global PMI data showed on Wednesday that the business activity in the US private sector expanded at an accelerating pace in January. S&P Global Composite PMI improved to 52.3 from… Read More »Gold Weekly Forecast: Fed decisions, US jobs data could help XAU/USD break out of range

The dovish shift in Fed forecasts in December – with three rate cuts pencilled in for 2024 – incentivised the market to push even more aggressively in pricing cuts. However, they appear to have gone too far too fast for the Fed’s liking, even though inflation is almost back to target. Expect more pushback against a March rate cut The Federal Reserve is widely expected to keep the Fed funds target range unchanged at 5.25-5.50% next Wednesday while continuing the process of shrinking its balance sheet via quantitative tightening – allowing $60bn of maturing Treasuries and $35bn of agency mortgage backed securities to run off its balance sheet each month. At the December Federal Open Market Committee meeting there was undoubtedly a dovish shift. We got an acknowledgement that growth “has slowed from its strong pace in the third quarter” plus a recognition that “inflation has eased over the past year”. With policy regarded as being in restrictive territory, the updated dot plot of individual forecasts indicated the committee was coalescing around the view that it would likely end up cutting the policy rate by 75bp this year. This was interpreted by markets as giving them the green light to push on more… Read More »Federal Reserve to downplay chances of imminent action while holding rates steady

Gold price attracts some buyers for the second straight day, though lacks follow-through. Sliding US bond yields, along with geopolitical tensions, lend some support to the metal. The USD stands tall near the monthly peak and caps any further gains for the XAU/USD. Traders also seem reluctant and prefer to wait for the release of the US PCE Price Index. Gold price (XAU/USD) edges higher for the second successive day on Friday, albeit lacks follow-through as traders opt to wait for the release of the US Personal Consumption Expenditures (PCE) Price Index before placing fresh directional bets. The Federal Reserve’s (Fed) preferred inflation gauge, or the Core PCE Index, which excludes more volatile food and energy costs, is seen easing from the 3.2% YoY rate to 3% in December and pointing to further progress on the disinflationary process. That said, robust US economic growth might complicate the path forward for monetary policy as cutting interest rates too quickly or too aggressively might pose a significant risk of reigniting inflation. In contrast, sticky inflation might give the Fed more headroom to keep rates higher for longer, suggesting that the path of least resistance for the non-yielding yellow metal is to the… Read More »Gold Price Forecast: XAU/USD awaits US PCE Price Index before the next leg down

AUD/USD resumes the upside despite dollar gains. The pair so far maintains a rangebound theme around 0.6600. Investors’ attention should now shift to the release of inflation figures. The bullish bias appears to be back in action, sponsoring a decent advance in AUD/USD to the 0.6600 neighbourhood once again on Thursday. Looking at the broader picture, it seems the pair remains trapped within a multi-session range around the 0.660 zone. The improvement in the Aussie dollar came despite marked gains in the greenback, while recent news citing further stimulus by the PBoC and the positive session in copper prices and iron underpinned the daily gains in the Aussie dollar. The Chinese factor, in combination with the projected decision by the Reserve Bank of Australia (RBA) to maintain its current policy stance at its meeting in February, is still seen as limiting the upside potential of the pair in the next few weeks, allowing for extra retracements in the short-term horizon. On the same side of the coin emerges the likelihood that the Federal Reserve could continue to delay expectations of an interest rate reduction in the coming months, a scenario that should prop up extra gains in the greenback.   Back… Read More »AUD/USD Forecast: Further consolidation in the pipeline