Olivia

Financial markets lift bets of a Federal Reserve rate cut in March despite US CPI data. European Central Bank has no extra room for rate hikes, unconfirmed pivot here. EUR/USD is losing its bullish potential, but a stronger slide is not yet clear. The EUR/USD pair is ending the week pretty much unchanged in the 1.0950 region, with investors feeling a bit disappointed after assessing the latest economic developments. Throughout the first half of the week, financial markets lacked directional momentum amid a scarce macroeconomic calendar and United States (US) first-tier data scheduled for Thursday. Economic developments in the United States and the Eurozone The US Dollar traded with a soft tone ahead of the release of the US Consumer Price Index (CPI) as investors hoped soft figures would keep the Federal Reserve (Fed) on the rate cut’s path. However, the numbers surpassed the market expectations. The December CPI rates printed at 0.3% MoM and 3.4% YoY, higher than November readings. Finally, core annual inflation declined from 4% to 3.9%, still above the 3.8% anticipated. The news initially triggered concerns about the Fed’s potential rate cuts. The US Dollar surged alongside government bond yields as stocks turned negative. Yet after… Read More »EUR/USD Weekly Forecast: Hot US inflation spurs risk aversion, markets keep betting on a March cut

GBP/USD hit fresh two-week highs, booking the first weekly gain of 2024. The focus shifts to top-tier UK employment and inflation data in the week ahead. Pound Sterling buyers are likely to face stiff resistance near 1.2900. The Pound Sterling (GBP) regained the upper hand against the US Dollar (USD) following a muted close to the first week of the new trading year. GBP/USD buyers jumped back into the game, as the monetary policy divergence between the US Federal Reserve (Fed) and the Bank of England (BoE) widened and checked the US Dollar recovery. US Dollar resumed downtrend, perked up Pound Sterling The US Dollar demand reduced, as markets continued to price in about a 70% probability that the Fed will cut the interest rate in March even after higher-than-expected US Consumer Price Index (CPI) data in December. Data showed headline CPI rose 0.3% last month, for an annual gain of 3.4%, higher than the expected 0.2% and 3.2%, respectively. Markets are also wagering about 140 pips of Fed rate cuts in 2024. On the other hand, money markets show traders are close to pricing in four rate cuts by the BoE this year, potentially as early as May, but… Read More »GBP/USD Weekly Forecast: Pound Sterling gains will likely remain capped

Gold recovered from multi-week low set below $2,020. Technical picture points to a bullish tilt in the near term outlook. Markets will scrutinize data from China and geopolitical headlines in the coming week. Gold started the week under modest bearish pressure but managed to erase its losses ahead of the weekend. Investors still see a strong probability that the Federal Reserve (Fed) will opt for a rate cut in March, not allowing US bond yields to push higher and supporting XAU/USD. Next week’s calendar will not offer any high-tier data releases from the US, but Chinese growth figures and geopolitical headlines could influence the precious metal’s valuation. Gold price gains traction ahead of the weekend The negative shift seen in risk appetite allowed the US Dollar (USD) to gather strength at the beginning of the week and caused Gold to push lower. Major equity indexes in Asia suffered large losses on news of Chinese wealth manager Zhongzhi Enterprise Group filing for bankruptcy liquidation after failing to repay debt. Later in the day, however, XAU/USD managed to erase a portion of its losses as the market mood improved. US stocks gained traction on growing optimism about the US government avoiding a… Read More »Gold Weekly Forecast: Bulls remain hopeful as US inflation data fails to lift yields

EUR/USD fluctuates above 1.0950 after Thursday’s volatile trading. The technical outlook fails to turn bullish as 1.1000 resistance stays intact. Producer inflation data from the US will be watched closely by investors. After spiking to 1.1000 on Thursday, EUR/USD made a sharp U-turn and dropped below 1.0950. With the US Dollar (USD) struggling to find demand in the late American session, the pair regained its traction and closed the day flat. The pair holds steady above 1.0950 early Friday as markets await producer inflation data from the US. Mixed inflation figures from the US ramped up market volatility on Thursday. The Consumer Price Index (CPI) rose 3.4% on a yearly basis in December, the US Bureau of Labor Statistics (BLS) reported. This reading followed the 3.1% increase recorded in November and came in above the market expectation of 3.2%. The Core CPI, which excludes volatile food and energy prices, rose 0.3% on a monthly basis to match analysts’ estimate. These prints failed to influence the market positioning on Federal Reserve (Fed) policy outlook in a noticeable way. The CME FedWatch Tool shows that the probability of a 25 basis points rate reduction in March stays about 70%. Commenting on the rate… Read More »EUR/USD Forecast: Buyers hesitate to commit to a move beyond 1.1000

European markets struggled once again yesterday on a combination of concerns over disappointing Q4 trading updates and a hotter than expected US inflation print which could see central banks defer upcoming rate cuts until later in the year.   US markets also slipped back initially before recovering off the lows of the day and closing flat on the day. Bond yields had a rollercoaster day initially rising on the higher-than-expected CPI reading before turning tail and falling sharply, with the US 2-year yield dropping over 10bps to fall back towards the lows seen at the end of last year. After yesterday’s hotter than expected CPI numbers attention now shifts to today’s US PPI release where we’ve seen prices slow much faster than headline CPI in recent months, with November PPI falling to 0.9%, however even here we could see signs of stickier inflation. On core PPI the patterns have been much more consistent, slowing steadily over the course of 2023, and dropping to 2% in November, and the lowest level since January 2021. For December, prices here are forecast to be slightly stickier in December with headline CPI rising to 1.3%, while core prices are set to come in unchanged… Read More »UK economy set to rebound in November, US PPI expected to edge higher

The Houthi leadership in Yemen faced a retaliatory strike by the US and the UK, targeting at least a dozen Houthi sites, including air defences, arms depots, and logistics centers. This response was triggered by the Houthi provocations in the Red Sea, notably a recent incident in the Gulf of Aden. The situation unfolds amid rising tensions in the region, part of broader conflicts involving Iran and its allies. While this event may not constitute the “big one” — a direct threat to Iranian leaders or assets — circumstances could evolve if the current escalation jeopardizes Iran’s credibility or an increasingly confident Israel expands its targets. Concerns about the risk of miscalculation are growing, as rational actors may unintentionally become entangled in an escalatory spiral. Given the inherent complexity of Middle East conflicts, achieving a stable outcome in the region appears challenging, signalling the potential for continued instability with broad global repercussions. Examining the potential implications of an escalation in growth and markets, the most significant impacts are expected to stem from energy supply disruptions. Oil prices could rise by 5% from current levels, while natural gas prices may surge by as much as 125%. In a “severe supply downside”… Read More »The Middle East powder keg may finally explode

Gold price remains a ‘buy-the-dip’ trade, as the US Dollar weakens post-CPI. Geopolitical tensions between West and Iran-backed Houthi rebels spook markets. Gold price looks set to break above the 21-day SMA at $2,045 on a weekly closing basis. Gold price is building on the previous upswing above $2,030 early Friday, as strong support near $2,015 continues to hold the fort. Gold buyers extend control, as the US Dollar fails to capitalize on the escalating geopolitical tensions between the West and Iran-backed Houthi militants. Gold price draws support from escalating geopolitical risks Following weeks of attacks on ships in the Red Sea by the Iranian-backed Houthi rebels, disrupting global shipping, the US and UK launched airstrikes late Thursday on Houthi targets in Yemen, hitting radar installations, storage sites and missile launchers. The Western retaliation occurred even after Houthi leader Abdul Malik Al-Houthi vowed a “big” response if the US and its allies took military action against his group. US President Joe Biden said he “will not hesitate to direct further measures to protect our people and the free flow of international commerce as necessary.” Japan came in support of the US and British airstrikes to secure the safe passage of vessels near the Arabian Peninsula. Intensifying geopolitical tensions… Read More »Gold Price Forecast: XAU/USD eyes weekly closing above the key $2,045 level

AUD/USD dropped to weekly lows near 0.6650. US CPI weighed on Fed’s interest rate cut bets. Australian trade surplus surprised to the upside in November. AUSD/USD rapidly faded Wednesday’s advance and refocused on the downside, briefly reaching fresh weekly lows in the 0.6650/45 band on Thursday. The CPI-driven bounce in the greenback put the risk-associated universe under further pressure and forced the Aussie dollar to give away the earlier uptick to the 0.6720 zone, recorded in the wake of firmer-than-expected trade balance results in the domestic economy. On the latter, the trade surplus in Australia widened to A$11.437B in November (from A$7.660B), with Exports up 1.7% vs. the previous month and Imports shrinking by 7.9% on a monthly basis. Looking at the short-term picture, dynamics around the greenback are predicted to keep dictating the sentiment around the pair, with speculation of interest rate cuts by the Federal Reserve taking centre stage. The latest release of the US CPI, however, poured cold water over investors’ prospects of rate cuts as soon as March. On the RBA side, recent inflation figures tracked by the RBA’s Monthly CPI Indicator suggest a pause by the central bank at its February gathering, despite the labour… Read More »AUD/USD Forecast: Technical rebound in the offing?

The acceleration of the US Producer Price Index (PPI) is anticipated to continue. In fact, the US Bureau of Labor Statistics predicts the inflation tracked by PPI to edge a tad higher in the last month of 2023, following the previous flat reading and October’s 0.4% monthly decline. The release of the PPI report has been growing in significance almost pari passu with the publication of monthly inflation figures gauged by the CPI and PCE, all against the backdrop of the current data-dependent stance from the Fed and in light of increasing speculation of rate cuts at some point early in the spring. The Headline PPI is expected to rise 0.1% MoM and 1.3% from a year earlier. In addition, Core PPI is seen rising at a monthly 0.2% and 1.9% over the last twelve months. So far, anticipation for PPI appears reasonable, especially when considering the uptick in the Consumer Price Index (CPI) data released on Thursday. Another positive surprise in the release could lend transitory support to the US Dollar, although the real impact on the Fed’s decision-making process appears blurred (to be optimistic).

XAU/USD Current price: 2,016.72 The December United States Consumer Price Index was higher than anticipated. CPI figures spurred risk aversion, as they mean “higher for longer” rates. XAU/USD pierced its weekly low and aims to test buyers’ determination around $2,000. Stronger than anticipated United States (US) inflation figures boosted the US Dollar ahead of Wall Street’s opening, putting mild pressure on XAU/USD. The US Dollar traded with a soft tone ahead of the announcement as investors hoped for upbeat figures. However, the Consumer Price Index was up 3.4% YoY in December, higher than the previous 3.1% and the 3.2% expected. The core annual reading came in at 3.9% vs the 3.8% anticipated, while the monthly increase was 0.3%. The US Dollar benefited from a risk-averse environment, as the data suggests the Federal Reserve (Fed) would have to maintain rates higher for longer, as policymakers anticipated multiple times. Higher price pressures weighed down the odds for a rate cut in March. As a result, stocks edged lower, with Wall Street trading in the red, and government bond yields ticked higher. XAU/USD short-term technical outlook XAU/USD trades near a fresh weekly low of $2,013.55, and the daily chart hints at another leg… Read More »Gold Price Forecast: XAU/USD at fresh weekly lows post-US CPI