XAUUSD Gold price is moving in an Ascending channel and the market has fallen from the higher high area of the channel
XAUUSD – Gold price stalls before FOMC Minutes
The Gold prices are moving lower against USD ahead of FOMC Meeting minutes scheduled today. US announced wide range of tariffs on China and retaliation China is increasing tariffs on imported cars of large displacement engines. The central banks more hurray of buying Gold’s due to Geopolitical tensions sustaining in the market.
The Gold price (XAU/USD) experienced a downturn on Wednesday, following a retreat from its recent record high observed on Monday. Federal Reserve (Fed) members voiced caution, indicating that the central bank requires more convincing evidence of easing inflation before considering interest rate cuts. This sentiment suggests the likelihood of sustained higher interest rates, which could bolster the Greenback and exert downward pressure on USD-denominated gold.
However, despite these factors, the decline in gold prices may be tempered by ongoing US-China trade tensions, geopolitical instability in the Middle East, and robust demand from central banks and Asian buyers, which could offer some support to the precious metal. Gold traders are keenly awaiting the release of the FOMC Minutes later on Wednesday, along with a speech by Fed official Goolsbee.
Market insights and sentiments:
– Fed Governor Christopher Waller expressed skepticism about the need for further rate hikes and emphasized the necessity of convincing data before supporting any rate cuts in the near future.
– Atlanta Fed President Raphael Bostic highlighted the importance of caution in the initial rate adjustment, preferring to wait longer to ensure stability in inflation.
– Cleveland Fed President Loretta Mester stated that maintaining restrictive rates is not a current concern, given the strength of the job market.
– Boston Fed President Susan Collins suggested on Wednesday that the path towards lower interest rates will be a gradual process.
– Financial markets anticipate the possibility of the first rate cut occurring in September at the earliest, with expectations of two quarter-percentage-point reductions before the year’s end, according to the CME Group’s FedWatch tool.
– On Tuesday, the US officially announced tariff hikes on a broad range of Chinese goods, while China is contemplating raising temporary tariff rates on imported cars equipped with large-displacement engines.
EURUSD – steady near 1.0850 before FOMC Minutes
The Euro zone trade balance widened to Euro 24.1 Billion in the March month from Euro 22.8 Billion in the previous month and Euro 19.9 Billion expected. ECB is expected to do three key rate cuts this year is expected from ECB Members. Now Waiting for FOMC Meeting minutes for further move.
EURUSD is moving in an Ascending channel and the market has fallen from the higher high area of the channel
EUR/USD remains stable as investors await the release of the Minutes from the Federal Open Market Committee (FOMC) meeting held on May 1, which is scheduled for Wednesday. During the Asian trading session, the currency pair is holding steady around the 1.0850 mark.
The Federal Reserve (Fed) is maintaining a cautious stance on inflation and the potential for rate cuts in 2024. Federal Reserve Bank of Boston President Susan Collins, speaking at the event “Central Banking in the Post-Pandemic Financial System” on Wednesday, highlighted that progress toward adjusting interest rates will take time. She emphasized the importance of patience as the appropriate policy for the Fed.
Market expectations suggest the first interest rate cut could occur as early as September, with two quarter-percentage-point reductions anticipated by the end of the year. According to the CME FedWatch Tool, there’s a slight increase in the probability of a 25 basis-point rate cut in September, rising to 50.3% compared to 49.6% a day earlier.
Eurostat’s recent release reveals a Trade Balance of €24.1 billion for March, exceeding both the previous month’s figure of €22.8 billion and market forecasts of €19.9 billion. This marks the largest trade surplus since December 2020.
Uncertainty looms over the European Central Bank (ECB) potentially extending its rate-cut cycle beyond June, lending support to the Euro. While ECB policymakers are open to the idea of initiating reductions in its three key interest rates starting from the June meeting, they are hesitant to commit to a definite rate trajectory. Instead, they prefer to adopt a data-dependent approach.
USDJPY – JPY weakens on widening trade deficit, focus on FOMC Minutes
The Japan April month trade deficit increased to Yen 462.5 Billion from last month surplus of Yen 387.0 Billion and Expected 339.5 Billion Deficit this month. The exports are increased to 8.3% in the April month to Yen 8980.7 Billion and imports grew up to 8.3% in the April month to Yen 9443.46 Billion versus 5.1% drop in the March month. Japanese Yen weakness further in the market after the data printed today.
USDJPY is moving in an Ascending channel and the market has rebounded from the higher low area of the channel
The Japanese Yen (JPY) faced a decline in value following the release of Japan’s Merchandise Trade Balance data on Wednesday. The report revealed a notable widening of the trade deficit, which expanded to ¥462.5 billion in April, a significant shift from the previous surplus of ¥387.0 billion. This deficit surpassed market expectations, which had anticipated a deficit of ¥339.5 billion. The depreciation of the JPY played a pivotal role in this outcome, leading to an increase in the value of imports that outweighed gains from a rise in exports.
Japan’s Exports (Year-over-Year) experienced a growth of 8.3%, reaching ¥8,980.75 billion. While this marked the fifth consecutive month of expansion, it fell short of forecasts, which had predicted an 11.1% increase. Imports also saw an 8.3% expansion, representing the strongest growth in 14 months and reaching a four-month peak of ¥9,443.26 billion. This growth reversed the trend from a revised 5.1% drop in March.
Meanwhile, the US Dollar (USD) strengthened in anticipation of the release of the Minutes from the Federal Open Market Committee (FOMC) meeting held on May 1, which were scheduled for publication on Wednesday. The rise in US Treasury yields provided support to the Greenback.
Market movers and sentiments:
– According to the CME FedWatch Tool, there’s a slight uptick in the probability of the Federal Reserve implementing a 25 basis-point rate cut in September, increasing to 50.3% from 49.6%.
– Federal Reserve Bank of Boston President Susan Collins emphasized on Tuesday that adjusting interest rates will require more time, advocating for patience as the appropriate policy for the Fed. Additionally, Federal Reserve Governor Christopher Waller mentioned the need for several more months of positive inflation data before considering a policy easing.
– Japanese Finance Minister Shunichi Suzuki expressed concerns about the negative impacts of a weak JPY and highlighted discussions in the market concerning long-term rates and appropriate national debt policies in Japan. There are hopes for wage increases to outpace inflation.
– A Bank of Japan (BoJ) survey revealed that approximately 70% of firms reported drawbacks from the BoJ’s prolonged monetary easing, citing a weak JPY that increased import costs. However, around 90% of firms acknowledged benefits, including low borrowing costs.
– Market sentiment suggests the possibility of the BoJ reducing bond purchases at the June policy meeting, although BOJ Governor Kazuo Ueda indicated no immediate plans to sell the central bank’s ETF holdings.
USDCAD – CAD retreats as Canadian CPI inflation moderates
The Canadian CPI Data for the month of April came at 2.7% YoY versus 2.9% printed in the last month, Core CPI Data fell down to 1.6% in the April versus 2.0% printed in the last month. Headline inflation fell down to 0.50% MoM versus 0.60% printed in the last month. Cooling inflation makes BoC rate cut poll in the June month increased to 48% from 40% before inflation data release.
USDCAD is moving in an Ascending channel and the market has rebounded from the higher low area of the channel
The Canadian Dollar (CAD) is experiencing a widespread weakening on Tuesday, depreciating against major currencies, notably dropping by approximately one-fifth of a percent compared to the US Dollar (USD). This decline follows the release of the Canadian Consumer Price Index (CPI) data for April, which showed a further moderation in inflation. Consequently, market expectations for a rate cut from the Bank of Canada (BoC) in June are on the rise.
The easing of Canadian CPI inflation was largely in line with market projections, but the BoC’s Core CPI, which excludes volatile items like food and energy, hit its lowest level since April 2021. With inflationary pressures subsiding, the likelihood of a rate cut by the BoC in June has increased to 48%, up from 40% before the release of the CPI figures.
In the realm of market movements:
– Canadian headline CPI inflation for April declined to 0.5% month-over-month (MoM), meeting expectations and down from the previous month’s 0.6%.
– Year-over-year (YoY) Canadian CPI inflation also matched market forecasts, standing at 2.7%.
– However, the BoC’s Core CPI for the twelve months ending in April dropped to 1.6%, down from the previous 2.0% and marking a three-year low.
Meanwhile, sentiment in the market is heavily influenced by speeches from policymakers at the US Federal Reserve, aimed at instilling confidence through verbal assurances.
Looking ahead, Canadian Retail Sales data is anticipated towards the end of the week. Median market forecasts suggest a slight improvement, expecting a flat reading compared to the previous month’s decline of 0.1%.
USDCHF – steady near 0.9100, attention on FOMC Minutes
The 10 Year Swiss Government Bond rose to 0.72% due to maintaining of rate cuts from SNB. This week SNB Chairman Thomas Jordan speech and Swiss Q1 employment level is scheduled. Today FOMC meeting minutes will decide the further move of USDCHF.
USDCHF is moving in an Ascending channel and the market has rebounded from the higher low area of the channel
The slight increase in the yield on the 10-year Swiss government bond, reaching around 0.72%, suggests the Swiss National Bank (SNB) may maintain current interest rates. This potential decision could strengthen the Swiss Franc (CHF) and weaken the USD/CHF pair.
Traders are anticipating the release of the Employment Level data by Swiss Statistics later in the week. Additionally, SNB Chairman Thomas Jordan is scheduled to deliver a speech on communication, monetary policy, and its public impact at the Swiss Media Forum in Lucerne, Switzerland, on Friday.
On the USD front, the correction in the US Dollar (USD) is linked to lower US Treasury yields, putting pressure on the USD/CHF pair. The US Dollar Index (DXY), which measures the USD against six other major currencies, is edging lower, hovering around 104.60. At present, the 2-year and 10-year yields on US Treasury bonds stand at 4.83% and 4.43%, respectively.
The Federal Reserve (Fed) continues to maintain a cautious stance on inflation and the potential for rate cuts in 2024. Loretta Mester, President of the Federal Reserve Bank of Cleveland, remarked on Monday in an interview with Bloomberg that she no longer sees three rate cuts in 2024 as appropriate. Mester emphasized the upside risks to inflation and stressed the importance of gathering more data on inflation, given the strength of the economy.
USD INDEX – Fed’s Collins: Rate adjustment progress delayed
The Boston FED President Susan Collings said Patience is the key success for attaining inflation goal to 2% target, until no rate cuts will be delivered from the FED side. Rate hikes are effectively controlled the domestic demands and still time to go to control the demand and supply in organised way. No Hurry for rate cuts, keep patience for healthy US economy gets Cooling inflation in the coming months.
USD INDEX is moving in the Box pattern and the market has fallen from the resistance area of the pattern
Boston Federal Reserve President Susan Collins delivered remarks at the “Central Banking in the Post-Pandemic Financial System” event on Wednesday, emphasizing that progress toward adjusting interest rates will require more time than anticipated.
In the wake of April’s Consumer Price Index (CPI) inflation data, which stirred hopes of a potential rate cut, Federal Reserve policymakers have maintained a cautious stance.
Here are some key quotes from Collins’ speech:
– “Elevated uncertainty continues to be a feature of the economy, and we can’t overreact to any single data point.”
– “Progress needed for interest rate adjustment will take longer.”
– “The Fed is well positioned, but it’s time for patience.”
– “Policy restrictions are evident in some indicators.”
– “There are warnings of potential longer policy lags due to special factors.”
– “The medium-term underlying neutral rate could be higher.”
– “Patience is the right policy for the Fed.”
GBPUSD – Pound Rises on Surprising UK Inflation, Reducing BoE Rate Cut Expectations
The UK CPI Data came at 2.3% YoY in the April month versus 3.3% printed in the March month and 2.1% is expected. Core CPI data came at 3.9% in the April month from 4.2% printed in the last month. Monthly basis grew by 0.30% in the April month versus 0.60% printed in the last month and 0.20% is expected. Sharp decline in the UK CPI Data near to 2% target of BoE makes more impressive for GBP against counter pairs.
GBPUSD is moving in an Ascending channel and the market has reached the higher high area of the channel
The Pound Sterling (GBP) surged to 1.2750 during Wednesday’s European session following the release of data by the United Kingdom (UK) Office for National Statistics (ONS), which showed a slower-than-expected decline in the Consumer Price Index (CPI) for April. Despite remaining above estimates, UK inflationary pressures moderated notably from the levels observed in March, indicating that the Bank of England’s (BoE) policy of higher interest rates is effectively curbing inflationary trends.
The lesser-than-anticipated decline in UK inflation is anticipated to dampen expectations for potential BoE rate cuts, which financial markets had previously speculated would commence from the August meeting.
Speculation regarding BoE’s potential rate cuts gained traction after BoE Deputy Governor Ben Broadbent remarked on Monday that if current economic trends persist as forecasted, suggesting that policy will need to become less restrictive, there is a possibility of a Bank Rate cut sometime during the summer, as reported by Reuters.
In a summary of the daily market movers, the Pound Sterling experienced a significant uptick to 1.2750 following the ONS report, which revealed higher-than-expected growth in consumer price inflation for April. Headline inflation recorded a year-over-year (YoY) increase of 2.3%, surpassing expectations of 2.1%, albeit registering a decline from the previous reading of 3.3%. Monthly headline inflation expanded by 0.3%, exceeding the forecast of 0.2%, although significantly lower than March’s figure of 0.6%.
Additionally, the UK’s annual core CPI, a measure excluding volatile items such as food and energy prices, grew by 3.9% YoY, above the consensus of 3.6%, but decelerated from March’s reading of 4.2%. This core inflation metric serves as the BoE’s preferred gauge for interest rate decisions. Despite inflation surpassing expectations, it remains on track to converge towards the 2% target.
Meanwhile, uncertainty prevails regarding the Federal Reserve’s (Fed) timeline for initiating interest rate adjustments. Fed policymakers advocate maintaining current interest rate levels until evidence suggests sustainable inflation decline towards the desired 2% rate. Despite recent progress in disinflation after a three-month stall earlier in the year, Fed policymakers express caution regarding its duration.
Cleveland Fed Bank President Loretta Mester echoed these sentiments on Tuesday, stating a preference for observing several more months of declining inflation before contemplating rate cuts.
The US Dollar (USD) remains range-bound as the Fed’s hawkish stance on interest rates exerts downward pressure, while growing speculation regarding potential rate cuts starting from the September meeting limits upside potential. Investors await insights from the Federal Open Market Committee (FOMC) minutes for the May meeting, scheduled for release on Wednesday, which will offer additional guidance on the interest rate outlook.
AUDUSD – AUD falls, USD steady before FOMC Minutes
The Westpac consumer confidence data came at -0.30% MoM in the May month versus -2.4% decline in the April month. RBA consideration for Further rate hikes in order to control the inflation in the Australian Economy boosted Australian Dollar against counter pairs.
AUDUSD is moving in an Ascending channel and the market has reached the higher low area of the channel
The Australian Dollar (AUD) saw notable fluctuations during the Asian trading session on Wednesday. The AUD/USD pair made gains following the rise of the New Zealand Dollar (NZD) after the Reserve Bank of New Zealand (RBNZ) chose to maintain its Official Cash Rate (OCR) at 5.5%. Given their geographical proximity and robust trade connections, both currencies often influence each other.
Investors are closely evaluating the Reserve Bank of Australia (RBA) monetary policy outlook. Tuesday’s RBA Meeting Minutes hinted at the board’s contemplation of a rate hike in May, though they ultimately opted to maintain a consistent policy. Policy-makers acknowledged the challenges of definitively deciding on future cash rate adjustments.
Australia’s Q1 inflation rate stood at 3.6% year-over-year, slightly lower than the previous quarter’s 4.1% but exceeding market projections of 3.4%. This suggests heightened inflation risks, as noted in the May RBA meeting minutes, prompting discussions about a potential interest rate increase.
Meanwhile, in the realm of the US Dollar (USD), traders are eagerly anticipating the release of the Minutes from the Federal Open Market Committee (FOMC) meeting held on May 1, scheduled for Wednesday. They seek insights into the Federal Reserve’s (Fed) policy direction, as the central bank remains cautious regarding inflation and the potential for rate cuts in 2024.
In other market movements, the ASX 200 Index surged close to 7,860 on Wednesday, buoyed by gains in heavyweight mining stocks due to strengthened metals prices. Australian shares also mirrored the previous night’s upswing on Wall Street, where both the S&P 500 and Nasdaq Composite hit new record highs.
Federal Reserve Bank of Boston President Susan Collins stressed the necessity of patience in adjusting interest rates during her address at the “Central Banking in the Post-Pandemic Financial System” event on Tuesday. Federal Reserve Governor Christopher Waller expressed his stance on inflation data, indicating the need for several more months of favorable figures before considering policy adjustments.
According to the CME FedWatch Tool, there’s a slight uptick in the probability of a 25 basis-point rate cut by the Federal Reserve in September, rising to 50.3% from 49.6% the previous day.
Australia’s Westpac Consumer Confidence saw a marginal 0.3% decline month-over-month in May, a softer downturn compared to April’s 2.4% decrease, marking the third consecutive month of decline.
Furthermore, the Chinese Commerce Ministry’s announcement of a ban on General Atomics Aeronautical Systems, a US company, from participating in import and export activities with China on Monday adds to ongoing trade tensions between the United States and China. Any economic shifts in China could impact the Australian market, given their close trade ties.
NZDUSD – RBNZ’s Orr: Inflation to Hit Target by Late 2024
The RBNZ Hold the rates at 5.50% today meeting, RBNZ Governor Orr Speech follows, This time rising rates at his consideration but members vote for Holding decision. Inflation rates will come down by the end of 2024, it is not absolute prediction, it is OCR track central projection. The Insurance, rent, rates did not affected by interest rates, only lower potential growth in NZ economy. Still far away our inflation target to come. Keep patience and domestic inflation will slowdown in coming months.
NZDUSD is moving in an Ascending channel and the market has rebounded from the higher low area of the channel
Reserve Bank of New Zealand’s (RBNZ) Governor Adrian Orr is addressing the policy outlook at a press conference following the announcement of the monetary policy decision on Wednesday.
Orr is fielding questions from the press.
Key quotes:
– Expect inflation to fall back into the target band by the end of 2024.
– It will take time for domestic inflation to decline.
– The economy has a lower potential growth rate, and it is uncertain if that is temporary.
– There is limited upside room for inflation surprises.
– We are pleased with inflation expectations coming down, but they need to fall further.
– The OCR track is a central projection, not an absolute prediction.
– We seriously considered raising rates at this meeting.
– A lot of high domestic inflation is affected by near-term factors.
– Insurance, rates, and rent costs are less sensitive to interest rates.
CRUDE OIL – WTI dips below $79.00 after Fed officials’ hawkish comments
The Crude oil prices are moving stable and no volatile after the death of Iran President Ebrahim Raisi. The OPEC+ meeting is scheduled at June 01 and proposal for voluntary cuts of 2.2M Barrels per day.
XTIUSD Oil price is moving in the Descending channel and the market has reached the lower low area of the channel
Despite recent developments in the Middle East, such as the tragic death of Iran’s President Ebrahim Raisi in a helicopter crash and emerging health concerns regarding Saudi Arabia’s King Salman bin Abdulaziz, these events do not seem to be impacting the market sentiment significantly.
Crude Oil prices faced pressure as investors pondered over recent hawkish comments from the Federal Reserve (Fed), despite the moderation seen in US consumer inflation data last week. Federal Reserve Vice Chair Michael Barr remarked on Monday that the Fed is in a favorable position to maintain its policy stance and monitor economic conditions closely, according to Reuters.
Loretta Mester, President of the Federal Reserve Bank of Cleveland, shared her perspective in an interview with Bloomberg, expressing a shift in her view on the necessity of three rate cuts in 2024. Mester pointed out that inflation risks are tilted towards the upside and stressed the importance of gathering more data on inflation, considering the robustness of the economy.
According to the CME FedWatch Tool, there’s a slight uptick in the probability of the Federal Reserve implementing a 25 basis-point rate cut in September, rising to 49.6% from 48.6% a week earlier.
Meanwhile, in Canada, the recently expanded Trans Mountain pipeline (TMX) commenced commercial operations this month, overcoming years of regulatory hurdles and construction challenges. This expansion will facilitate the transportation of an additional 590,000 barrels per day (bpd) from Alberta to Canada’s Pacific coast.
Investor focus is now shifting towards the upcoming meeting of the Organization of the Petroleum Exporting Countries and its allies (OPEC+) scheduled for June 1. During this meeting, decisions will be made regarding output policy, including whether to extend voluntary production cuts of 2.2 million barrels per day implemented by some member countries.
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