XAUUSD Gold price is moving in the Descending channel and the market has fallen from the lower high area of the channel
XAUUSD – Gold price trades lower, attention on Fedspeak
The Gold prices are moving down after the University of Michigan report shows One year inflation rate in the US will be 3.5% and Five Year inflation rate will be 3.1%. Michigan consumer sentiment fall down to 67.4 from 77.2 printed in the last month, it is the six month low reading in a row.
Gold price, represented by XAU/USD, is trading lower during the Asian session on Monday. The decline is attributed to the hawkish comments from the Federal Reserve (Fed), fueling speculation that the central bank might delay its plans to ease monetary policy. This has led to a strengthening of the US Dollar (USD), which in turn has weighed on the price of gold denominated in USD. However, despite this negative trend, gold remains supported by signs of economic weakness and ongoing geopolitical tensions in the Middle East.
Gold traders are closely monitoring speeches by Fed officials Jefferson and Mester on Monday. Additionally, attention will be on key economic data releases later in the week, including the US Consumer Price Index (CPI), Producer Price Index (PPI), and Retail Sales reports. Stronger-than-expected economic data could dampen expectations for a Fed rate cut, potentially putting further downward pressure on the XAU/USD pair.
In terms of recent developments, San Francisco Fed President Mary Daly emphasized the need for sustained restrictive policy to achieve the Fed’s inflation targets. Conversely, Atlanta Fed President Raphael Bostic indicated that the central bank is likely still planning interest rate cuts despite uncertainties in the economic outlook. Meanwhile, Dallas Fed President Lorie Logan cautioned against premature rate cuts, citing upside risks to inflation. Minneapolis Fed President Neel Kashkari adopted a cautious stance, stating that he is in a “wait-and-see mode” regarding monetary policy decisions.
On the geopolitical front, the Israeli military has conducted operations in northern Gaza, with ongoing activities reported in eastern Rafah and near the Rafah border, as well as in the Zeitoun neighborhood. These developments precede a potential escalation in the region.
In economic news, the initial reading of the Michigan Consumer Sentiment Index for May came in weaker than expected, dropping to 67.4 from April’s 77.2. Additionally, the University of Michigan’s one-year and five-year inflation outlooks reached their highest levels since November 2023, indicating heightened concerns about inflation among consumers.
EURUSD – Falls as Dollar Rebounds on Fed Rate-Cut Prospects
The Euro zone economy is expanded by 0.30% in the Q1 2024 and ECB Policy makers said July month rate cut is possible and three more rate cuts in this year is more possible. On Contrary, ECB Governing council member Robert Holzmann said there is no need for rate cuts at this time, once inflation come back to our target of 2% then we do proper steps in the market.
EURUSD is moving in the Descending channel and the market has reached lower high area of the channel
The currency pair struggles to maintain its upward momentum amidst growing anticipation that the European Central Bank (ECB) will initiate a series of interest rate cuts in June.
Despite these expectations, there are divisions among ECB policymakers regarding the extent of the rate-cutting cycle post-June meeting. Some policymakers advocate for additional rate cuts starting from the July meeting to stimulate price pressures.
Yannis Stournaras, an ECB policymaker and Governor of the Bank of Greece, stated in a recent interview that he foresees three rate cuts this year. He views a rate reduction in July as a plausible scenario, noting that the first-quarter economic rebound increases the likelihood of a three-cut scenario over four. Notably, the Eurozone economy expanded by 0.3% in the January-March period, surpassing expectations.
Conversely, Robert Holzmann, a member of the ECB Governing Council and Governor of Austria’s central bank, expressed skepticism about the need for swift and aggressive interest rate cuts. He emphasized that there is no compelling reason to implement such measures hastily.
The market sentiment surrounding EUR/USD this week has been influenced by the absence of significant economic data releases from both the Eurozone and the United States. However, attention will shift next week to the US Consumer Price Index (CPI) data for April, scheduled for release on Wednesday.
In the broader market context, EUR/USD faces pressure as the US Dollar stages a recovery. Investors are digesting speculations suggesting that the Federal Reserve (Fed) might commence interest rate reductions as early as September. The recent rise in Initial Jobless Claims, coupled with sluggish job growth and decreased job openings, has fueled concerns about the strength of the US labor market. Consequently, there is increasing anticipation for Fed rate cuts to support economic growth.
Minneapolis Fed Bank President Neel Kashkari expressed concerns about the labor market’s weakness and its implications for inflation. While acknowledging the possibility of a rate cut, Kashkari leans towards maintaining the current interest rate framework throughout the year, citing uncertainties in inflation dynamics amid a robust housing market.
USDJPY – Kato: Japan Moving towards Monetary Policy Normalization
The Former Chief Cabinet Secreatary Katsubonu Kato said Bank of Japn must coordinate with Japan Ruling Government and do rate hikes whether it is necessary or not. The Wage rise equals to inflation rise is the healthy medium in the economy, rate hikes equals to inflation rise is not healthy one. Soon the Bank of Japan do normalise the policy settings according to economy moves in the Japan.
USDJPY is moving in an Ascending channel and the market has rebounded from the higher low area of the channel
According to Katsunobu Kato, a former chief cabinet secretary, Japan is currently witnessing favorable conditions aligning for the central bank to commence the normalization of its monetary policy. This sentiment was echoed by a notable figure within the ruling party, indicating a growing political consensus supporting the implementation of further interest rate hikes.
Kato emphasized the importance of the Bank of Japan (BOJ) closely monitoring economic conditions and coordinating effectively with the government to determine the opportune timing for initiating rate increases. He highlighted the transition in Japan’s economic landscape, noting a shift towards an environment characterized by rising prices and wages, a departure from previous stagnation. In light of these developments, Kato advocated for a return to the traditional monetary policy framework, where interest rates reflect market dynamics and operate in positive territory.
Despite the positive outlook, Kato emphasized the significance of Japan’s economic performance, particularly in terms of consumption, in informing the decision to raise interest rates. He acknowledged that while the economy is undergoing positive changes, the strength of consumption remains a pivotal factor influencing monetary policy decisions.
USDCAD – Maintains Above 1.3650, Attention on Federal Reserve Communications
The Canadian Jobs added 90K in the April month makes 15 Month higher in the employee added month. The unemployment rate held at 6.1%. Higher Job data makes Bank of Canada to extended the delay of rate cuts in the monetary policy settings. So Canadian Dollar exerts positive pressure in the market against counter pairs.
USDCAD is moving in the Descending triangle pattern and the market has rebounded from the support area of the pattern
During the early European trading session on Monday, the USD/CAD pair exhibited a partial recovery, hovering around the 1.3680 mark. Concurrently, the USD Index (DXY) maintained its positive stance, standing at approximately 105.30, with investors keenly awaiting key economic indicators from the United States. Notably, the final reading of the US Consumer Price Index (CPI) is scheduled for release on Wednesday. Analysts anticipate a 3.4% year-on-year increase in April, slightly lower than March’s 3.5% annual rise.
US Federal Reserve (Fed) officials have emphasized their cautious stance on adjusting monetary policy. They await concrete evidence of a sustained decline in inflation before contemplating a reduction in the fed funds rate from its 23-year high. Dallas Fed President Lorie Logan underscored the uncertainty surrounding the adequacy of current monetary policy in curbing inflation to the 2% target. Consequently, she advocated against premature interest rate cuts. Similarly, San Francisco Fed President Mary Daly stressed the necessity of maintaining a prolonged restrictive policy to achieve the Fed’s inflation objectives. Minneapolis Fed President Neel Kashkari adopted a “wait-and-see” approach, asserting the need for a high threshold to justify interest rate hikes, reflecting the Fed’s cautious demeanor. These remarks from Fed officials bolstered the Greenback and provided tailwinds for the USD/CAD pair.
Meanwhile, the Canadian economy exhibited robust performance, adding 90,000 jobs in April, marking the most substantial increase in 15 months. This figure exceeded expectations of a 20,000 job gain, as reported by Statistics Canada. Additionally, the Unemployment Rate remained steady at 6.1% in April. The resilience of the labor market affords the Bank of Canada (BoC) additional time to assess the sustainability of inflation. However, the Loonie faced selling pressure due to a decline in crude oil prices. Canada, being a major exporter of oil to the United States, experienced downward pressure on its currency.
USDCHF – Swiss Healthcare ‘Cost Brake’ Referendum Explained
The Swiss Health care accounts 11.8% in the Swiss GDP. Over 31% increase in the Health care expenses and 6% wage increase in the year. The Government may narrow this gap or consult with health care companies to cap the costs of selling prices of Health care products. Lower income people in the Swiss zone is more suffered to claim the insurance policies after the savings and spending.
USDCHF is moving in an Ascending channel and the market has reached the higher low area of the channel
The Swiss healthcare system is renowned for its high costs, constituting 11.8% of the country’s GDP, making it one of the most expensive globally. Over the years, this has led to substantial increases in health insurance premiums, particularly burdening low-income households and becoming a primary concern for the Swiss populace.
In response to these challenges, an initiative known as the Centre’s External linkinitiative, which will be voted on alongside three other issues on June 9, aims to introduce a mechanism to curb the escalating costs of compulsory health insurance.
The initiative proposes implementing a cap on healthcare costs to ensure they do not outpace economic growth and wage increases. Specifically, it suggests activating a mechanism whenever healthcare expenditure rises by 20% more than wages in a given year. If triggered, the federal government would collaborate with various stakeholders to implement measures to control costs, although the specifics would be decided by parliament in subsequent legislation.
However, the Swiss government and parliament have developed an indirect counter-proposal in opposition to the Centre’s initiative. This alternative plan focuses on defining targets to manage compulsory health insurance costs, allowing authorities to set goals for maximum spending growth annually and take appropriate measures if these targets are exceeded.
Supporters of the Centre’s initiative argue that a cost brake would compel all stakeholders in the healthcare system to collaborate on implementing measures to reduce costs without compromising the quality of care. Conversely, opponents caution against linking health spending to economic conditions, expressing concerns that cost controls may lead to reduced services covered by basic insurance and exacerbate inequalities in access to healthcare.
Notably, neither left- nor right-wing parties have uniformly supported or opposed the Centre’s initiative, reflecting the complex and multifaceted nature of the issue.
USD INDEX – USD gains for the week attributed to hawkish Fed speakers
The FED Speakers shows hawkish tone in their every media speech makes US Dollar proved stronger in the market. Only one rate cut is visible in the 2024 if inflation slowdown to 2% near target. Current economy in the US looks resilient and consumer spending is higher, so this time rate cuts are not much needed, if done then inflation will go higher , this fears highlighted by the economists side.
USD INDEX is moving in an Ascending channel and the market has reached the higher low area of the channel
The US Dollar Index (DXY) is currently trading around the 105.35 mark, showing slight gains on Friday as the trading week draws to a close. The Greenback maintains its position but appears to be in a holding pattern as investors await catalysts to guide their next moves, particularly concerning the Federal Reserve’s (Fed) forthcoming decisions.
Amidst a backdrop of economic uncertainty in the United States, market participants are anticipating indications of moderating inflation, which could embolden the Fed to initiate rate cuts. However, Fed officials have maintained a hawkish stance, contributing to the cautious sentiment prevailing in the market.
Daily Digest Market Movers: DXY Holds Steady Amid Fed Speaker Insights
San Francisco Fed President Mary Daly reiterated the necessity of sustained restrictive policies to achieve the Fed’s inflation targets.
Atlanta Fed President Raphael Bostic suggested the possibility of an economic slowdown, although the timing of potential rate cuts remains ambiguous.
Overall, the Fed remains circumspect regarding the timing of any easing measures. While some Fed members anticipate a single rate cut this year, the majority of market forecasts suggest that rate cuts may commence around September. This cautious approach by the Fed contrasts with the dovish signals conveyed by Fed Chair Jerome Powell last week.
The outcome of April’s Consumer Price Index (CPI) will be pivotal in shaping market expectations moving forward.
GBPUSD – above 1.2500, eyes on UK labor data
The UK Q1 GDP expanded by 0.60% printed on Friday makes UK fears of recession over after the 2023 stagnated reading. BoE is extended to keep the rates at 5.25% and Chief economist Huw Pill said rates at this state is safe for UK economy in order to bring down the inflation to lower level.
GBPUSD is moving in the Descending channel and the market has reached the lower high area of the channel
The Pound Sterling (GBP) received a boost from stronger-than-expected UK Gross Domestic Product (GDP) data released on Friday. The UK economy expanded by 0.6% in the first quarter, surpassing forecasts and signaling an end to the country’s brief recession. This growth marked the strongest performance in over two years.
However, the GBP faced some headwinds following dovish comments from Huw Pill, Chief Economist at the Bank of England (BoE). Pill echoed the sentiments of the majority of the BoE’s Monetary Policy Committee (MPC), who opted to maintain interest rates at 5.25% during Thursday’s meeting. Yet, Pill indicated a growing belief among policymakers that rate cuts could be on the horizon.
Market participants are eagerly awaiting the release of UK labor market data scheduled for Tuesday. Expectations are for an increase in the Claimant Count Change, indicating more individuals claiming jobless benefits in April. Additionally, the ILO Unemployment Rate (3M) is anticipated to show a rise in the number of unemployed workers in the UK.
In the United States (US), investors will focus on key economic indicators for potential market drivers throughout the week, including the Consumer Price Index (CPI), Producer Price Index (PPI), and Retail Sales.
On Friday, the US Dollar (USD) faced some pressure following the release of the University of Michigan Consumer Sentiment Index, which fell to 67.4 in May from April’s 77.2. This marked a six-month low and fell short of market expectations. However, the impact on the USD may have been mitigated by an increase in inflation expectations for the year ahead. The reading of 3.5% was the highest in six months, up from April’s 3.2%. Additionally, the five-year inflation outlook rose to 3.1%, reaching a six-month high. These inflation indicators may have supported US Treasury yields, providing some support to the Greenback.
AUDUSD – China’s April CPI Inflation Surges to 0.3% YoY, Exceeding Expectations
The China CPI index for YoY increased to 0.30% in the April versus 0.10% increase in the March month and expected 0.10%. MoM increased to 0.10% versus 1.0% decline in the March month. PPI data fell down to 2.5% YoY versus 2.8% declined in the last month and 2.3% is expected. The Australian Dollar fell down after the data printed.
AUDUSD is moving in the Box pattern and the market has reached resistance area of the pattern
In April, China’s Consumer Price Index (CPI) experienced a year-on-year (YoY) increase of 0.3%, contrasting with the 0.1% growth observed in March. This figure surpassed market expectations, which had anticipated a 0.1% rise.
On a monthly basis, Chinese CPI inflation stood at 0.1% in April, signaling a moderation from the 1.0% decline recorded in March.
Meanwhile, China’s Producer Price Index (PPI) recorded a YoY decline of 2.5% in April, an improvement from the 2.8% drop registered previously. However, the reported data fell short of expectations, as analysts had forecasted a 2.3% decrease for the same period.
NZDUSD – RBNZ Survey: NZ inflation down to 2.30% Q2 ’24
The RBNZ inflation expectations for Two Year timeframe Q2 2024 is dropped to 2.33% from 2.50% forecasted in Q1 2024, One Year Timeframe is dropped to 2.73% ( Q2 2024) from 3.22% predicted in Q1 2024. NZ Dollar slight drop after the inflation expectations lower in the One Year and Two Year Timeframe.
NZDUSD is moving in the Descending channel and the market has reached the lower high area of the channel
In the second quarter of 2024, the Reserve Bank of New Zealand’s (RBNZ) monetary conditions survey revealed a continued decline in inflation expectations across both the 12-month and two-year outlooks. This decline was observed on Tuesday.
In terms of the two-year horizon, which is considered the timeframe for RBNZ policy interventions to influence prices, inflation expectations eased marginally from 2.50% in the first quarter of 2024 to 2.33% in the second quarter of the same year.
Moreover, average one-year inflation expectations for New Zealand decreased to 2.73% in the second quarter of 2024, marking a notable drop from the 3.22% recorded in the preceding quarter.
CRUDE OIL – WTI Dips Near $77.50 Amid Oil Demand Uncertainties
The Iraq Deputy PM Hayan Abdul Ghani said they are going to agreed with OPEC+ Voluntary output cuts in the coming months and this oil output cuts due to over supply in the market surviving and to stabilize the Oil prices in the market.
XTIUSD Oil price is moving in the Ascending channel and the market has reached the higher low area of the channel
During Monday’s Asian session, the price of West Texas Intermediate (WTI) crude oil experienced a second consecutive decline, hovering around $77.70 per barrel. This downward trajectory in oil prices is primarily attributed to uncertainties surrounding the demand for crude oil.
Key factors contributing to this trend include indications from US Federal Reserve (Fed) officials suggesting that interest rates may remain elevated for an extended period. Such a scenario could potentially dampen economic growth and subsequently reduce oil demand in the United States (US), which is the world’s largest oil consumer. Moreover, the release of the US Consumer Sentiment Index on Friday added to evidence indicating a slowdown in the economy. The index dropped to 67.4 in May from April’s 77.2, hitting a six-month low and falling short of market expectations.
Neel Kashkari, President of the Minneapolis Federal Reserve (Fed), voiced concerns regarding the degree of tightness in monetary policy. In an interview with CNBC on Friday, Kashkari acknowledged that while the criteria for another rate hike are stringent, they cannot be entirely discounted. Similarly, San Francisco Fed President Mary Daly emphasized the importance of maintaining a prolonged restrictive policy to achieve the Federal Reserve’s inflation goals.
Additionally, China reported another decline in its Producer Price Index (PPI), marking a 2.5% drop. This marks the 19th consecutive month of deflation, signaling persistent sluggishness in business demand in the largest oil-importing nation. This exerts additional downward pressure on oil prices.
In the Middle East, Iraq reiterated its commitment to the voluntary oil production cuts agreed upon by the Organization of the Petroleum Exporting Countries (OPEC). Hayan Abdul Ghani, Deputy Prime Minister for Energy Affairs and Minister of Oil of Iraq, affirmed Iraq’s readiness to cooperate with fellow member nations in efforts aimed at fostering greater stability in the global oil markets.
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