Olivia

Gold price meets with a fresh supply amid reduced bets for a March rate cut by the Fed. Geopolitical risks, retreating US bond yields and a softer USD lend support to the metal. Traders now await this week’s important macro releases before placing directional bets. Gold price (XAU/USD) comes under some renewed selling pressure on Wednesday, albeit lacks follow-through and remains confined in a multi-day-old trading range through the early European session. Traders have now pushed back bets for an early interest rate cut by the Federal Reserve (Fed) in the wake of the strong US macro data, which suggested that the economy is in good shape. In fact, the current market pricing indicates a greater chance of the first interest rate cut in May, which was initially expected in March. Adding to this, the recent hawkish remarks by a slew of Fed officials forced investors to further scale back their expectations for a more aggressive policy easing in 2024. This, in turn, is seen as a key factor driving flows away from the non-yielding yellow metal. The downside for the Gold price, however, remains cushioned amid the worsening geopolitical conditions in the Middle East, which tends to benefit the… Read More »Gold Price Forecast: XAU/USD remains confined in a multi-day-old range, looks to global PMIs

USD – Some headwinds for the dollar After strong gains from the summer, the dollar weakened again significantly from October. This continued a volatile sideways movement that began at the start of 2023. On the one hand, the markets reflected the high level of uncertainty regarding interest rate developments in both economic areas. On the other hand, however, the interest rate paths ultimately turned out to be similar. There is no clear preference for one of the two currencies this year either. Interest rate cuts are to be expected in both the eurozone and the USA. However, the timing and extent are uncertain, which speaks for volatility on the markets. We assume that the fundamental picture will shift slightly in favor of the eurozone, where the economy should improve somewhat. In the USA, on the other hand, we expect a slight weakening. All in all, this means some headwind for the dollar and therefore a slight weakening. JPY – BoJ remains cautious At its meeting in December, the Bank of Japan indicated that the sustainable and stable achievement of the inflation target is not yet foreseeable with sufficient certainty. For the time being, monetary easing will therefore be continued by… Read More »Minor movements in the Euro expected

After an initially positive start European markets finished the day lower after as the sugar rush from reports of a large-scale Chinese stimulus plan, gave way to scepticism that it would be enough to deliver the help needed when what is needed is proper economic reforms as opposed to more liquidity. US markets underwent another record-breaking session with the Nasdaq 100 and S&P500 securing new record highs, while the Dow finished the day lower, as Netflix beat expectations after the closing bell on its Q4 numbers. Last night’s positive finish in the US looks set to see markets in Europe open higher again today, though we could well struggle to hang onto the gains if recent experience is any guide.    If the ECB ever had a reason to think about cutting rates, then today’s manufacturing and services PMIs would offer a compelling reason but for the fact that headline inflation is at 2.9% and core inflation is at 3.4%, and policymakers have insisted that tackling prices is their priority. Let’s see how if that consensus holds out tomorrow when the ECB meets for the first time this year. Over the last 15 months both the French and German manufacturing sectors… Read More »Flash PMIs and Bank of Canada rate decision in focus

XAU/USD Current price: 2,023.62 Wall Street trades with a softer tone after reaching record highs on Monday. Market participants await US first-tier data and central banks’ announcements. XAU/USD holds ground but bears gain confidence amid broad US Dollar strength. Gold keeps trading in a well-limited range on Tuesday, with XAU/USD changing hands just above $2,020 a troy ounce. The bright metal surged throughout the first half of the day as market players dropped the US Dollar following fresh record highs on Monday in the S&P 500 and the Dow Jones Industrial Average. Wall Street rallied on hopes the Federal Reserve (Fed) will soon start trimming interest rates after pushing them to multi-decade highs in the pandemic aftermath. Furthermore, signs that the United States (US) economy could dodge a recession provide impetus to high-yielding equities. The USD gathered momentum ahead of the American opening, as equities could not maintain their positive tone. US indexes trade with modest losses as speculative interest paused ahead of earnings reports. The season has kick-started with optimism, as so far, companies have reported above-expected profits. Still, upcoming releases alongside macroeconomic events scheduled for the second half of the week triggered the ongoing pause. Data-wise, US figures… Read More »Gold Price Forecast: XAU/USD turns bearish in the near term, holds above $2,000

EUR/USD Current price: 1.0868 The European Central Bank decision and critical US data keep investors cautious. Wall Street closed at record highs amid mounting hopes of soon-to-come rate cuts. EUR/USD turned bearish in the near term, still needs to pierce 1.0845. The EUR/USD pair trades at the lower end of its weekly range as the US Dollar gathers strength mid-European morning. The USD shed some ground throughout the first half of the day as a better market mood backed demand for high-yielding currencies. The main driver was Wall Street, as United States (US) indexes closed at record highs. Investors are optimistic about cooling inflation to soon allowing the Federal Reserve (Fed) to cut interest rates, while solid earnings reports confirm the economic resilience. The US Dollar’s strength in a risk-on scenario is no coincidence. The country proved to be leading the economic comeback, and the Fed is likely to lead the monetary policy shift by being the first to cut rates.   A certain caution, however, persists as market participants await first-tier events scheduled for later in the week. On the one hand, the European Central Bank (ECB) will announce its decision on monetary policy next Thursday. On the other hand, the… Read More »EUR/USD Forecast: Bears strengthen ahead of first-tier clues

EUR/USD gained traction and recovered above 1.0900 early Tuesday. Strong resistance seems to have formed in the 1.0930-1.0935 region. Risk perception could impact the pair’s action in the second half of the day. After posting marginal losses on Monday, EUR/USD benefited from the renewed US Dollar (USD) weakness and climbed above 1.0900 in the early trading hours of the European session on Tuesday. The pair, however, could have a difficult time clearing the 1.0930-1.0935 resistance area unless there is a noticeable improvement in risk mood later in the day.

Many EU sectors are set to face weak development in 2024. Manufacturing, staffing and construction are likely to witness a decline, but not all sectors will lose their footing. Transport and retail volumes will see a slight recovery, and Technology, Media and Telecom (TMT) will show lower – but still high – growth figures. Many sectors struggle with slow development Development production (volume value added) EU sectors (Index 2018=100). Source: Eurostat, ING Research (*2023 estimate and 2024 forecast) Freight transport picks up after post-pandemic correction The European transport and logistics sector is about to see a bit more of a return to normality in 2024 from the demand side – although the start of the year is set to remain pretty tumultuous for overseas trade due to the Red Sea crisis. After digesting the pandemic aftershocks of spending normalisation, inventory reductions and geopolitical headwinds sending freight and port volumes down, 2024 is bound to be a better year. The German economy and manufacturing slump (see below) will still drag on demand for (industrial) goods. However, compared to the low base of 2023 and some recovery in consumer spending on goods, volumes are not expected to sink further. On the smaller passenger side, the post-pandemic pent-up demand of… Read More »What to expect from European sectors in 2024

Trying to convince markets that pricing rate cuts is wrong requires offering guidance, something that the European Central Bank may have little interest in doing at this stage. We are, indeed, in a phase of data dependency. Expect President Lagarde to reiterate it. We don’t expect this meeting to be a turning point for eurozone rates or for the euro. We discuss here what is our baseline expectation for the January ECB policy meeting. In short, we think President Lagarde and her colleagues are not as obsessed with the market’s dovish pricing as many believe, and that they would rather stick to pure data-dependency and avoid offering guidance rather than focusing their efforts on a rate cut pushback. In other words, do not expect a significant change in the ECB’s language this month. The market implications – by extension – should not be material if our baseline scenario materialises. There is probably some modest room for a pick-up in rates and for the euro, as market expectations lean towards some targeted rate-cut pushback, but that should not last long. A data-dependent ECB makes markets data-dependent, meaning upcoming releases on inflation and activity in the eurozone may well have a greater market impact than… Read More »January’s ECB cheat sheet: Giving markets the cold shoulder

Outlook: This week we get the ECB policy meeting and the US GDP and PCE readings It’s not hard to say which will be more important to the FX world. US GDP is forecast at 1.8% (from the wild 4.9% in Q3), although the Atlanta Fed has it a bit higher at 2.4% as of Friday, the last one for Q4 and the new one next Friday for Q1. We also get the S&P Global flash estimates of the Jan PMIs. December PCE data (Friday) will run the table. Headline is expected to remain steady at 2.6% y/y while core is expected to fall two ticks to 3.0%. As noted, the 6-month and 3-month change in core PCE inflation is near or below the Fed 2% target and that inspires many to keep calling for the early cut.  The ECB is expected to keep rates on hold and perhaps to sound hawkish, considering chief Lagarde’s recent comments. Meanwhile, the Fed will be silent, having entered the blackout period before the Jan 30 policy meeting. That won’t stop traders from drawing conclusions from the core PCE data. The second thoughts about the timing of the first rate cut, and the later… Read More »ECB policy meeting, US GDP, and PCE readings: Which will be more important to the FX world?

AUD/USD gives away part of the recent recovery. Dollar dynamics continue to weigh on the Aussie dollar. No changes to expectations around an interest rate hold by the RBA. The noticeable resumption of the selling bias around the Aussie dollar prompted AUS/USD to leave behind a two-day recovery and remain under pressure in the sub-0.6600 zone at the beginning of a new trading week. So far, dollar dynamics coupled with still-absent signs of a convincing economic bounce in the post-pandemic era in China are expected to keep dictating the mood around spot and maintain its price action subdued, all in combination with a predicted steady hand by the RBA at its gathering in February. Also contributing to the negative kickstart of the new trading week emerged an equally discouraging session of both copper prices and iron ore. Back to the RBA, the central bank is largely anticipated to leave its OCR unchanged at 4.35% next month. The downtick in inflation figures recorded in December, coupled with further cooling of the (still tight) labour market, have underpinned that consensus among market participants for the time being. That said, the near-term prospect for the AUD remains tilted to the dovish side, a… Read More »AUD/USD Forecast: Further losses not ruled out