XAUUSD – Gold Price Stalls as Traders Await US CPI and Fed Decision
The Gold prices are moved lower ahead of FED and US CPI data scheduled this week. Rate cuts from the central banks is really benefitted for Gold storage costs reduction. China is paused buying Gold after the 18 month consecutive purchases.
XAUUSD is moving in an Ascending channel and the market has rebounded from the higher low area of the channel
During Wednesday’s early European session, the gold price (XAU/USD) struggles to maintain its recent modest gains and exhibits a negative bias. However, this downtrend lacks momentum as traders eagerly await two significant events: the release of the latest consumer inflation figures from the United States (US) and the outcome of the highly-anticipated Federal Open Market Committee (FOMC) meeting scheduled for later in the day. These events are expected to provide fresh insights into the Federal Reserve’s (Fed) stance on interest rate adjustments, thus determining the short-term direction for the non-yielding yellow metal.
Leading up to these pivotal data and events, investors have been dialing back their expectations for an immediate interest rate cut by the Fed in September. This shift comes amidst a robust US labor market and persistent inflationary pressures. Consequently, the US Dollar (USD) maintains its strength near a one-month peak, exerting downward pressure on gold prices. However, the downside is cushioned by renewed political uncertainties in Europe and ongoing geopolitical tensions, prompting caution among bearish traders before extending the recent pullback from the all-time high.
Key factors affecting the gold price include reduced expectations for a near-term Fed rate cut, China’s decision to pause gold purchases, and the strength of the USD, which has been weighing on the Dollar-denominated commodity. Market sentiment suggests that the Fed may only reduce rates by 25 basis points later in the year, potentially in November or December, further supporting the USD.
Traders are currently adopting a cautious approach and await further cues regarding the timing of potential Fed rate cuts before making significant directional bets on XAU/USD. Consequently, attention remains focused on the release of the latest US consumer inflation figures and the FOMC’s monetary policy decision later in the US session.
Recent robust employment and wage data have raised concerns that inflationary pressures may persist in the face of a resilient US economy, reinforcing the narrative of higher interest rates for a longer duration. Market expectations indicate a slight easing in the headline US Consumer Price Index for May, while core CPI is anticipated to remain steady, underscoring stubbornly high inflationary pressures.
The forthcoming FOMC meeting is expected to leave interest rates unchanged while providing updated economic projections, including the influential “dot plot,” which will play a crucial role in shaping market sentiment towards the precious metal.
EURUSD – ECB’s Villeroy Urges Clarity on France’s Budget Strategy Amid Political Tensions
ECB Governing council member and Bank of France President Francois Villeroy De Galhau said France GOvernment has to report proper budget and economy health before elections to be held. Inflation will be at 2% in France in the Starting of the next year and even 1.7T% is seen.
EURUSD is moving in the Descending channel and the market has fallen from the lower high area of the channel
In a recent statement, European Central Bank (ECB) policymaker François Villeroy de Galhau highlighted the importance of France providing clarity regarding its budget strategy, especially amidst ongoing political tensions. Villeroy’s remarks underscore the significance of transparent fiscal policies, particularly in navigating turbulent political environments.
France’s commitment to outlining its budgetary plans can contribute to fostering stability and confidence, crucial elements for economic resilience and growth within the European Union. Villeroy’s comments signal the ECB’s attentiveness to fiscal developments across member states and emphasize the need for proactive and transparent fiscal management amid political uncertainties.
USDCHF – Hovers Around 0.8950 as Investors Await FOMC Decision
The Swiss Franc is appreciated against counter pairs due to June 20 rate cut is more doubtful from SNB, SNB Chairman already told in the speech, inflation is quite smaller upside in coming months. This week Financial stability report and PPI data is scheduled from Swiss zone.
USDCHF is moving in the Descending channel and the market has rebounded from the lower low area of the channel
The CHF received support as the Swiss National Bank (SNB) is unlikely to implement an interest rate cut in June. SNB Chairman Thomas J. Jordan previously warned of minor upside risks to inflation expectations.
Traders are awaiting the SNB Financial Stability Report on Thursday, which will assess the stability of the banking sector and financial market infrastructure. Additionally, focus will be on Producer and Import Prices data.
Meanwhile, the USD remained stable ahead of the Federal Reserve’s (Fed) policy decision on Wednesday. The Fed is expected to maintain interest rates within the range of 5.25%-5.50% as it aims to address inflation toward its 2% target.
The robust US jobs data for May has lowered the probability of a Fed interest rate cut in September. According to the CME FedWatch Tool, the likelihood of a Fed rate cut of at least 25 basis points in September has decreased to 52%, down from 67% a week earlier.
Investors will also monitor key US inflation data expected later in the North American session. The US headline and core Consumer Price Index (CPI) figures for May are forecasted to show year-over-year increases of 3.4% and 3.5%, respectively.
USDJPY – Limited Downside for Japanese Yen Likely as Producer Prices Rise
The Japan PPI data for the May month came at 2.4% YoY versus 2.0% printed in the last month. Q1 GDP data contracted this week to -1.8% and -0.50% MoM. Japanese Yen weakness in the market due to weak Japan data printed in this week.
USDJPY is moving in an Ascending channel and the market has rebounded from the higher low area of the channel
On Wednesday, the Japanese Yen (JPY) extended its losing streak for the fourth consecutive session, with the USD/JPY pair strengthening as investors favored the US Dollar (USD) ahead of the Federal Reserve’s (Fed) decision and the release of US inflation figures for May, scheduled later in the North American trading hours.
Despite this, the Japanese Yen may find support from higher-than-expected Japanese Producer Price Index (PPI) data, which revealed a 2.4% year-on-year increase in May, surpassing market expectations of a 2.0% rise. This raised concerns about potential upward pressure on consumer inflation.
The Bank of Japan (BoJ) is anticipated to maintain its monetary policy unchanged on Friday. The interest rate disparity between the US and Japan continues to weaken the Japanese Yen (JPY), providing a favorable environment for the USD/JPY pair.
Meanwhile, the US Dollar Index (DXY), which gauges the USD against six major currencies, remains robust following the release of strong US jobs data for May, reducing the likelihood of a Fed rate cut in September. The CME FedWatch Tool indicates a decreased probability of a Fed rate cut of at least 25 basis points in September, down from 67% a week earlier.
In other news, Japan’s Finance Minister Shunichi Suzuki emphasized the importance of economic growth and fiscal health to maintain confidence in the country’s fiscal policy. Additionally, nearly two-thirds of economists surveyed anticipate that the Bank of Japan will begin tapering its monthly bond purchases at Friday’s policy meeting, signaling a gradual reduction in the central bank’s balance sheet.
Furthermore, Japan’s 10-year government bond yield dipped below 1% ahead of the BoJ’s policy meeting, with traders closely monitoring for any potential adjustments in the bank’s monthly bond purchases.
Regarding Japan’s economic performance, the Gross Domestic Product (GDP) Annualized contracted by 1.8% in the first quarter, slightly exceeding market forecasts. However, Japan’s GDP (QoQ) shrank by 0.5%, aligning with initial estimates.
Looking ahead, Rabobank suggested the possibility of Federal Reserve rate cuts in September and December, attributing this to a potentially deteriorating economy rather than progress on inflation. Meanwhile, BoJ Governor Kazuo Ueda stated that while inflation expectations are gradually rising, they have yet to reach the 2% target. Ueda indicated a cautious approach to monetary stimulus exit, citing the need to reduce bond purchases gradually.
USDCAD – Canadian Dollar Steady as Markets Brace for Fed ‘Dot Plot’ Update
The BoC rate cuts in the last week moved Canadian Dollar down against counter pairs. Employment and unemployment rate rose to higherin the May month end. Oil prices are higher is the supportive for Canadian Dollar in the market.
USDCAD is moving in an Ascending channel and the market has fallen from the higher high area of the channel
The Canadian Dollar (CAD) remained relatively stagnant on Tuesday as investors maintained their cautious stance ahead of crucial data releases from the US scheduled for Wednesday. The focus is primarily on the US Consumer Price Index (CPI) inflation figures, followed by the Federal Reserve’s (Fed) interest rate decision, widely anticipated to maintain rates within the 500-525 basis point range.
In terms of economic data, Canada is experiencing a week of low-tier releases, with the exception of a statement from the Bank of Canada’s (BoC) Governor Tiff Macklem, expected on Wednesday. However, Macklem’s remarks are expected to be overshadowed by market reactions to any adjustments in the Fed’s “dot plot” of Interest Rate Projections, which coincides with the Fed’s rate decision this week.
Here are some key highlights from the market movements:
The CAD saw minimal movement, trading within a narrow range against its counterparts.
Canadian Building Permits saw a significant surge of 20.5% in April, marking the highest month-on-month change in four years.
Market expectations are leaning towards a cooling of US CPI inflation to 0.1% month-on-month in May, down from the previous 0.3%.
Projections indicate that US Core CPI is anticipated to decline slightly to 3.5% year-on-year compared to the previous 3.6%.
While the Fed is expected to maintain current interest rates, investor attention will be closely directed towards the Fed’s updated “dot plot” on Wednesday.
Rate markets suggest slightly better-than-even odds of at least a quarter-point cut from the Fed in September, as indicated by the CME’s FedWatch Tool.
USD INDEX – US Dollar Gains Momentum as Markets Await Wednesday Session
The ongoing Federal Open Market Committee (FOMC) meeting, spanning two days from Tuesday to Wednesday, holds significant importance for market participants. Any alterations to the interest rate projections or guidance provided by Federal Reserve (Fed) officials are poised to trigger notable market movements. Of particular interest is the release of the renowned dot plot, which offers insights into policymakers’ rate hike expectations.
USD INDEX is moving in an Ascending channel and the market has rebounded from the higher low area of the channel
Market observers are eagerly awaiting the updated dot plots, which are expected to offer valuable insights. Even a minor adjustment, such as a reduction from three anticipated interest rate cuts to two by a Fed policymaker, could potentially impact the 2024 median, potentially shifting it from 4.625% to 4.875%.
There’s a prevailing expectation in the markets for a ‘hawkish hold’ from the Fed, indicating that interest rates will likely remain at the current level of 5.5%. Consequently, the likelihood of a rate cut in September appears to be evenly balanced, with odds standing at approximately 50:50. Meanwhile, the probability of a rate cut in November is estimated to be around 85%.
In addition to the FOMC meeting, the US is set to release key inflation data on Wednesday. Forecasts suggest that the core Consumer Price Index (CPI) for May may experience a slight deceleration, settling at 3.5% year-over-year, while headline inflation is anticipated to hold steady at 3.4%. These inflation figures will provide further insights into the economic landscape and may influence the Fed’s future policy decisions.
GBPUSD – Pound Sterling Stabilizes Post UK GDP Data Showing April Economic Stall
UK GDP data came lower than expected in the April month, Services sector mild expansion. Manufacturing reading came at -1.4% decline from -0.20% expected, Industrial production reading came at -0.90% versus -0.10% is expected. Higher rates did not tackled by Consumer and Businesses in the UK. GBP moved down after the reading came.
GBPUSD is moving in an Ascending channel and the market has rebounded from the higher low area of the channel
In Wednesday’s London session, the Pound Sterling (GBP) maintained its position around 1.2750 against the US Dollar (USD), showing minimal reaction to the United Kingdom’s (UK) monthly Gross Domestic Product (GDP) and Industrial Production data for April. According to the UK Office for National Statistics (ONS), the economy remained stagnant in April, aligning with economists’ expectations and indicating a subdued start to the second quarter.
The UK economy’s lack of growth in April stemmed from a mild expansion in the services sector, which was offset by a decline in Industrial Production and construction output. Notably, the manufacturing sector experienced reduced activity, particularly in the pharmaceutical and food sectors.
Both Manufacturing Output and Industrial Production data, reflecting factory activity, contracted more than anticipated in April following expansion in March. Monthly Manufacturing Production witnessed a notable decline of 1.4%, surpassing expectations of a slight decrease of 0.2%. Similarly, Industrial Production dropped by 0.9%, exceeding forecasts of a marginal 0.1% decline.
The weak factory data suggests challenges for households and businesses in coping with the high interest rates set by the Bank of England (BoE), potentially prompting the BoE to consider easing its monetary policy sooner.
However, certain indicators may deter policymakers from immediately pursuing rate cuts. Despite the subdued economic performance, UK wage growth remains robust, serving as a significant obstacle for the BoE’s return to policy normalization. Wage growth continued to rise steadily by 6.0% in the three months to April, significantly surpassing the threshold required for inflation to reach the desired rate of 2%.
Looking ahead, the Pound Sterling is anticipated to experience volatility ahead of the release of US Consumer Price Index (CPI) data for May and the Federal Reserve’s (Fed) monetary policy announcement in the New York session. Market sentiment regarding the timing and extent of potential Fed rate adjustments will be heavily influenced by the inflation data. While the Fed is expected to maintain rates unchanged, investors will closely scrutinize the Fed’s dot plot for insights into policymakers’ outlook on future rate trajectories. Recent economic indicators suggesting tight labor market conditions and persistent price pressures may lead to a more hawkish stance from Fed officials, potentially impacting currency market dynamics.
AUDUSD – China’s May CPI Inflation Steady at 0.3% YoY, Below 0.4% Forecast
China CPI inflation data for the month of May came at 0.30% YoY versus 0.40% is expected, -0.10% MoM came in the May month and 0.10% increase in the April month. China PPI index came at -1.4% versus -2.5% printed in the April month. Mixed bags of data moved higher for Australian Dollar against Counter pairs.
AUDUSD is moving in the Box pattern and the market has rebounded from support area of the pattern
In May, China’s Consumer Price Index (CPI) saw an annual increase of 0.3%, matching April’s growth rate but falling short of the anticipated 0.4%. On a month-to-month basis, the CPI registered a decline of 0.1%, contrary to the expected 0% change, and following a 0.1% increase in April.
In terms of the Producer Price Index (PPI), there was a 1.4% year-over-year drop in May, which is a smaller decline compared to the 2.5% decrease in April. This result was slightly better than the forecasted 1.5% decrease.
These figures suggest a continuing trend of weak inflation in China, which may reflect subdued domestic demand and other economic pressures. The lower-than-expected CPI growth and the smaller-than-expected decline in PPI could imply challenges for China’s economic policy aimed at stimulating growth.
NZDUSD – Slips Below 0.6150, Attention Shifts to US CPI and Fed Rate Decision
The NZ Dollar moved down ahead of FED decision and US CPI data scheduled today. RBNZ Hawkish stance on rate hold throughout this year is most back up for NZ Dollar against counter pairs.
NZDUSD is moving in an Ascending channel and the market has rebounded from the higher low area of the channel
Investors adopted a cautious stance ahead of significant events in the United States, lending some support to the Greenback. Key events on the horizon include the release of the US Consumer Price Index (CPI) data and the Federal Open Market Committee (FOMC) monetary policy meeting.
Expectations are widespread that the FOMC will maintain interest rates at their current levels during its June meeting, given the lack of substantial progress in pushing inflation towards the 2% target. According to the CME FedWatch tool, there is a 52% probability of a rate cut by the Fed in September, with the likelihood of a cut in November standing at around 67%.
Following a period of hotter-than-expected inflation in the first quarter of the year, US inflation exhibited signs of moderation in April. Traders are eagerly awaiting the May CPI release for further insights into the inflation trajectory. Should the report indicate persistent elevated US inflation in May, speculation about potential Fed rate cuts this year may intensify, potentially bolstering the US Dollar (USD) across the board.
In New Zealand, inflation continues to surpass the Reserve Bank of New Zealand’s (RBNZ) target band of 1-3%, albeit gradually receding. However, the central bank remains concerned about sustained domestic inflation and is increasingly contemplating a future rate hike. The RBNZ’s latest forecasts suggest the commencement of an easing cycle in the third quarter of this year. The RBNZ’s hawkish stance is anticipated to support the New Zealand Dollar (NZD) and provide tailwinds for the NZD/USD pair.
CRUDE OIL – WTI Stabilizes Near $78.00 Following EIA’s Upbeat Global Demand Forecast
The EIA reported the Oil demand will be 1.10 Million barrels per day in this year from 0.90Million Barrels perday in the previous forecast. OPEC+ said they have more profits in this year due to demand increasing in the summer season of the second half of the year.
XTIUSD Crude oil price is moving in the Descending channel and the market has reached the lower high area of the channel
Optimistic global demand forecasts from the US Energy Information Administration (EIA) could potentially drive crude oil prices higher.
According to Reuters, the EIA raised its 2024 world oil demand growth forecast to 1.10 million barrels per day (bpd), up from the previous estimate of 900,000 bpd. Additionally, the Organization of the Petroleum Exporting Countries (OPEC) maintained its 2024 forecast for strong growth in global oil demand, citing expectations for increased travel and tourism in the second half of the year.
Analysts at the energy consulting firm Gelber and Associates remarked that “Futures are higher as expectations of summer demand are supportive of prices despite the broader macro landscape remaining less optimistic than weeks previous,” as reported by Reuters.
However, the recent strong US jobs report has reinforced the Federal Reserve’s hawkish stance on monetary policy. The Fed is expected to maintain higher borrowing costs for an extended period, potentially slowing economic growth and reducing demand for oil. Investors are eagerly awaiting the Federal Reserve’s policy decision, along with the US inflation figures for May, which are scheduled for release on Wednesday.
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