XAUUSD Gold price has broken the Descending channel in upside
GOLD – Price Set to Rise with Weakened USD and Lower Risk Appetite
US ISM Manufacturing PMI data came at 47.8 from 49.1 in January month is more disappointing for the US Dollar, but is positive for Gold in the international market. Still, there is a calm situation in the War talks between Gaza and Israel side, which may cause a little slowdown for Gold in the market.
The US Dollar struggles amid speculation of a Federal Reserve (Fed) policy shift, supporting the safe-haven gold. Equity market softness contributes, but rising US Treasury bond yields temper further gold gains. Traders await cues on the Fed’s rate-cut trajectory, with a focus on Fed Chair Jerome Powell’s testimony. Key US macro data, including Nonfarm Payrolls on Friday, will shape market sentiment.
Daily Digest Market Movers: Gold buoyed by various factors
Disappointing US macro data and less-hawkish Fed remarks keep the USD defensive, benefiting gold.
The US ISM Manufacturing Index contracted in February, with employment dropping to a seven-month low.
University of Michigan’s Consumer Sentiment Index fell to 76.9 in February, missing estimates.
Fed officials express views on restrictive policy rates, balance sheet shrinking, and inflation expectations.
Fed Governor Waller suggests increasing the central bank’s share of short-term Treasuries, influencing Treasury yields.
A softer risk tone supports safe-haven XAU/USD amid subdued USD demand, but upside potential is limited ahead of key US data and Powell’s testimony.
EURUSD – Rebounds on Exceeding EU Inflation Forecasts
The Eurozone CPI data for February came at 2.6% than the 2.5% estimated. Core CPI data came at 3.1% versus the 2.9% expected and it is lower than the 3.3% January data.
EURUSD is moving in the Box pattern and the market has rebounded from the support area of the pattern
Eurozone Inflation Beats Estimates, Boosts EUR/USD; Manufacturing PMI Data Analyzed
EU inflation data surpassed expectations, contributing to a rebound in the major currency pair. The Eurozone Harmonized Index of Consumer Prices (HICP) rose 2.6% YoY, exceeding the forecasted 2.5%. Core HICP increased to 3.1% YoY, surpassing the consensus of 2.9% but slightly lower than January’s 3.3%.
As a result, both European and US yields rose, providing support for the EUR/USD. Investors are anticipating 90 basis points of rate cuts in 2024, with the first cut expected in June. Nordea and Commerzbank economists project a gradual rate cut by the European Central Bank (ECB) based on the expectation of impending wage increases.
ECB’s Robert Holzmann emphasized the need to remain attentive to inflation risks, cautioning against hasty rate decisions.
Richmond Fed President Thomas Barkin delivered a hawkish stance, expressing uncertainty about rate cuts this year and emphasizing the importance of consistent economic data. S&P Global reported a sharp expansion in manufacturing activity in February, with the PMI rising from 50.7 to 52.2. However, ISM’s Manufacturing PMI for February came in at 47.8, below the estimated 49.5 and January’s 49.1.
USDJPY – Japan Government Considers Ending Deflation – Kyodo
According to Kyodo News Agency, the Japanese Government is keen on an End to Deflation in Japan. This will be decided only after the Wage Talks meeting on March 13. Whether Wage hikes will offset the price hikes of Companies. The Bank of Japan is very stubborn on Wage hikes increasing the inflation rate, then only It will be healthier inflation rate in the Economy.
USDJPY is moving in the Box pattern and the market has rebounded from the support area of the pattern
According to informed sources, Japan’s Kyodo News reported on Monday that the Japanese government is considering officially declaring an end to deflation, indicating increased concerns about potential policy tightening.
The decision will be based on the strength of annual labor-management wage talks scheduled for March 13 and the ability to offset price hikes while considering the outlook on price trends, as stated by the sources.
USDCHF – Faces Resistance Below Mid-0.8800s, Watches Swiss CPI Data
The Swiss CPI data for February is scheduled today, the expected reading is 1.1% from 1.3% printed in January. The expected reading means that SNB has the chance to make a rate cut in the March month meeting itself.
USDCHF is moving in an Ascending channel and the market has reached the higher low area of the channel
The pair’s decline is supported by a weakened US Dollar (USD) and lower US Treasury bond yields. Traders are awaiting the Swiss February Consumer Price Index (CPI) for potential momentum, anticipating a decrease from 1.3% in January to 1.1% in February.
The US Manufacturing Purchasing Managers Index (PMI) revealed a decline to 47.8 in February, below the market’s 49.5 expectation.
Fed officials, including Boston’s Susan Collins and New York’s John Williams, suggest a potential rate cut later this year. Atlanta’s Raphael Bostic anticipates policy easing this summer, pending economic developments. Investors await insights from Fed Chair Jerome Powell’s testimony on Wednesday, which may impact the USD/CHF pair.
In Switzerland, unexpected January inflation rate decrease may prompt the Swiss National Bank (SNB) to consider rate cuts in March. The Swiss Federal Statistical Office will release the Consumer Price Index (CPI) for February, offering potential catalysts for the USD/CHF pair.
USDCAD – Rises Near 1.3560 Despite Increased Crude Oil Prices; Attention on BoC Policy Decision
OPEC+ Nations agreed to cut 2.2 million barrels per day and it can continue up to the Second quarter of 2024. This news moved crude oil prices higher and the Canadian Dollar made stronger against Counter pairs.
USDCAD is moving in an Ascending channel and the market has reached the higher high area of the channel
USD/CAD retraces despite higher crude oil prices, traditionally supportive of the Canadian Dollar (CAD) as a major oil exporter. The USD/CAD pair’s advances may be constrained as West Texas Intermediate (WTI) oil edges higher to approximately $79.50 per barrel, following OPEC+’s decision to extend oil output cuts.
Canada’s S&P Global Manufacturing PMI slightly improves, reaching 49.7 but remains below the 50.0 threshold indicating sector contraction.
The Bank of Canada (BoC) is set to announce its interest rate decision next Wednesday, with expectations of maintaining the current rate at 5.0%.
The US Dollar Index (DXY) hovers around 103.80, influenced by improved US Treasury yields. Despite a contraction in the US manufacturing sector, the USD faces pressure.
US ISM Manufacturing PMI for February drops to 47.8, missing the market expectation of 49.5. The US Michigan Consumer Sentiment Index falls to 76.9, below the expected 79.6.
Fed officials maintain a cautious stance, providing some support for the USD amid concerning economic data. Investors monitor upcoming releases like ISM Services PMI, ADP Employment Change, and Nonfarm Payrolls for February to assess the US economy’s health and potential future monetary policy decisions by the Federal Reserve.
USD INDEX – Fed Inflation Expectations Aligned with 2% Goal
The Latest monetary policy settings from the FED show is tight labour market, Inflation goal is 2%. FED is expected a Softening of interest rates with inflation weakness. Strong Labour growth with strong retail spending makes a neutral stance for FED.
USD INDEX is moving in an Ascending channel and the market has reached the higher low area of the channel
A Latest Fed Monetary Policy Report Highlights:
– Inflation expectations align broadly with the 2% goal.
– Labor market remains tight, with eased demand and increased supply.
– 6-month Core PCE increased at an annualized rate of 2.5%, acknowledging short-term inflation measures may exaggerate temporary factors.
– Delay in reducing target range until the Fed gains greater confidence in sustainable inflation movement toward 2%.
– Housing supply constrained by higher rates, tighter underwriting, zoning, and regulations.
– Risks to achieving Fed goals moving into better balance; continued vigilance on inflation risks.
– Strong labor market, remote work trends, and cash payments support housing demand despite higher rates.
– Rapid adoption of AI and robotics may enhance productivity growth.
– Softening in market rents indicates a projected deceleration in housing services prices.
– Ongoing softening of labor demand and improvements in labor supply expected to contribute to a further slowing in core services price inflation.
EURJPY – Maintains Above 163.00, Investors Await Japanese CPI Data
The ECB would like to Maintain the policy rate at the current stance, they feared due to Middle East tensions could move the inflation prices sharply from the current reading. So ECB will maintain the current rates this week.
EURJPY is moving in ascending channel and the market has rebounded from the higher low area of the channel
The Euro (EUR) finds support in the risk-on market environment, favoring the EUR/JPY pair. However, potential changes in the Bank of Japan’s (BoJ) monetary policy stance may limit Japanese Yen (JPY) losses.
Speculation grows about the BoJ shifting its monetary policy, potentially strengthening the Japanese Yen. BoJ policymaker Hajime Takata hinted at an exit from ultra-loose policy, aiming for the 2% inflation target. Japan considers ending deflation, heightening risks of policy tightening.
On the Euro side, the European Central Bank (ECB) is expected to maintain interest rates in March. ECB policymakers emphasize caution and patience, awaiting sustained evidence of inflation changes. Geopolitical tensions in the Middle East may delay ECB rate cut speculations.
Market focus includes the Japanese Consumer Price Index (CPI) on Tuesday and Eurozone Retail Sales on Wednesday. Thursday’s ECB interest rate decision and press conference will guide traders in navigating opportunities within the EUR/JPY cross.
GBPUSD – Carry Trade Interest to Support Pound – ING
The UK Budget is starting from March 6, expectations are Chancellor Jeremy Hunt may give incentives for Foreign investors to invest in the UK or Domestic national to reduce taxes in case invested in Domestic assets.
GBPUSD is moving in the Box pattern and the market has rebounded from the support area of the pattern
Expectations for the March 6 UK Budget could influence Pound Sterling (GBP) dynamics, analyzed by ING economists. Continued investor interest in the carry trade is expected to support the Pound, with a 12-month target just over 1.3000. However, if Chancellor Hunt misreads gilt investors’ mood, Sterling might face pressure, potentially experiencing a 2% sell-off.
On a positive note, there is speculation about improving incentives for global multinationals to list in the UK or for British savers to direct investments towards UK asset markets, although these measures may not match the US Homeland Investment Act’s impact on the Dollar.
AUDUSD – China’s NPC Annual Meeting Set for March 5-11 in Beijing – Spokesman
China’s NPC Spokesman Lou Qinjain said Congress is going to schedule a meeting from Mach 05- March 11. China’s Government is planning to do more financial reforms to boost the economy further from the Covid-19 economic slowdown.
AUDUSD has broken the Descending channel in upside
Hong Kong laws must be protected and we can join hands to make future AI Developments and give Global growth as unity strength.
China’s National People’s Congress (NPC) spokesman, Lou Qinjian, announced on Monday during a news conference that the annual NPC meeting is scheduled to take place in Beijing from March 5 to March 11. Lou emphasized the government’s commitment to enacting new laws, focusing on deepening economic reform, including financial institutional reform to support private companies.
Additional statements from Lou include the NPC’s full support for Hong Kong regarding the new national security law and a warning against the negative impact of decoupling on technological advancement and global industry development. He expressed confidence in overcoming technological challenges and emphasized the inevitability of progress, particularly in frontier areas like AI. The spokesperson hinted at upcoming research on legislation related to technological advancement.
Lou also mentioned that Premier Li will unveil China’s economic growth target at the annual NPC session on the following day. However, it was noted that Premier Li won’t be holding a press conference after the session.
NZDUSD – Kiwi Attractive on Yield Appeal – OCBC
The Analysts at the OCBC Bank said RBNZ may be the last bank to cut rates when compared to Other central banks. China’s economy is improving is an added advantage for Kiwi Pairs. Currently, rates will remain at the neutral level until the inflation rate comes down.
NZDUSD is moving in the Descending channel and the market has fallen from the lower high area of the channel
NZD/USD Consolidates Post-RBNZ; OCBC Sees Attractive Yield Appeal
Despite some ongoing unwinding of Kiwi longs, NZD remains appealing due to the yield appeal, as RBNZ is expected to be among the last DM central banks to cut rates. Rates are anticipated to stay at a restrictive level for a sustained period to achieve the inflation objective. There is a possibility of policy divergence with the Fed in 2H 2024, and the eventual stabilization of the Chinese economy should further support the NZD.
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