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AUD/USD partially reversed the recent steep pullback. The RBA left its OCR unchanged, as expected. The RBA’s Bullock sounded somewhat hawkish at her press conference. Finally, some respite for the Aussie dollar came in the wake of the RBA’s widely anticipated decision to keep its Official Cash Rate (OCR) unchanged on Tuesday. Indeed, the Reserve Bank of Australia maintained a hawkish stance by keeping interest rates unchanged at 4.35%, in line with expectations. However, it left the possibility open for a potential interest rate hike in the future. The Statement on Monetary Policy (SoMP) showed the RBA slightly lowered its inflation projections and anticipates both indicators to remain below 3% by Q4 2025. Additionally, the RBA reduced its GDP growth forecasts across the forecast period, largely due to a dimmer short-term outlook for consumer spending and housing investments. At her press conference, Governor Bullock diverged from the anticipated shift towards a dovish stance and emphasized that addressing inflation remains incomplete, highlighting that the current inflation rate is deemed excessively high. Bullock underscored a neutral stance by stating, “We are neither committing to nor dismissing any course of action.” Despite her assertive stance, market participants persist in pricing in a 50… Read More »AUD/USD Forecast: Next on the upside comes the 200-day SMA

I have written that the commercial real estate market could be the next thing to pop in this bubble economy and that could lead to the next major financial crisis. But you don’t need to worry. Federal Reserve Chairman Jerome Powell assured us that everything is fine. During a 60 Minutes interview aired Sunday, Feb. 4, Powell conceded some smaller and regional banks with “concentrated exposures” in commercial real estate “are challenged.”  But he said he wasn’t concerned about these problems spreading into the broader banking system as the subprime crisis did in 2008. “I don’t think there’s much risk of a repeat of 2008,” he said, adding, “I do think it’s a manageable problem.” Powell sounds a lot like former Federal Reserve Chairman Ben Bernanke who insisted in 2007 that problems in the subprime mortgage sector were “contained.” On March 28, 2007, Bernanke told Congress everything was fine.  The ongoing tightening of lending standards, although an appropriate market response, will reduce somewhat the effective demand for housing, and foreclosed properties will add to the inventories of unsold homes,” Bernanke said. “At this juncture, however, the impact on the broader economy and financial markets of the problems in the subprime market seems likely to… Read More »Fed Chair Powell channels Ben Bernanke, assures us everything is fine!

XAU/USD Current price: 2,036.90 Financial markets completed bets on delayed rate cuts, USD demand eased. Federal Reserve speakers stand out in an otherwise quiet week. XAU/USD trimmed part of its latest losses, turned technically neutral. Spot Gold recovers ground on Monday as demand for the US Dollar receded. The XAU/USD pair trades near an intraday high of $2,038.17, recovering some of the ground shed in the last few days. Financial markets are all about delayed rate cuts following central bankers from around the globe pouring cold water on investors’ expectations of tighter monetary policies. On Tuesday, it was the turn of the Reserve Bank of Australia (RBA) to join the cautious stance, as policymakers decided to leave the door open for additional hikes should conditions require it. Meanwhile, solid US macroeconomic data further undermined the odds of a Federal Reserve (Fed) cut. As a result, government bond yields rallied, backing the US Dollar. By Tuesday, it seems investors have completed repositioning in this new scenario. Bonds recovered, and yields retreated, limiting demand for the USD. Data-wise, the macroeconomic calendar has nothing relevant to offer these days, although multiple Fed speakers will be on the wires. Loretta  Mester, President and Chief… Read More »Gold Price Forecast: XAU/USD recovers on easing US Dollar demand

EUR/USD Current price: 1.0734 The US Dollar pared its rally as the market sentiment marginally improved. European data was mixed but did not impact the Euro, still trading on sentiment. EUR/USD trades near its January low and is poised to break below it. The  EUR/USD pair bottomed for January at 1.0723 on Monday and trades nearby as the new day develops. The US Dollar retains its strength across the FX board, although the momentum eased alongside government bond yields’ run. Financial markets are still digesting global rate cut delays, which won’t come as soon as expected. Early in Asia, the Reserve Bank of Australia (RBA) announced its monetary policy announcement, leaving rates unchanged as widely anticipated. However, local policymakers joined the cautious train and said additional hikes could not be ruled out. Asian stocks traded mixed, with Chinese indexes backed by governmental intervention. Still, the mood seems to have improved in Europe, as local shares hold on to modest gains, underpinning Wall Street ahead of the opening. Currently, the 10-year Treasury note offers 4.16%, unchanged from Monday’s close. On the data front, Germany reported that Factory Orders were up 8.9% MoM in December, beating the market expectations. On the contrary,… Read More »EUR/USD Forecast: Break through 1.0700 on the table

EUR/USD recovered above 1.0750 in the early European session on Tuesday. The pair’s bearish bias remains intact despite the rebound. Buyers could show interest in case Euro stabilizes above 1.0800. EUR/USD staged a technical correction and rose above 1.0750 early Tuesday after touching its weakest level since mid-November near 1.0720 on Monday. The pair’s near-term technical outlook is yet to point to a bullish tilt. The US Dollar (USD) continued to gather strength against its rivals on Monday as the benchmark 10-year US Treasury bond yield stretched higher on growing expectations about the Federal Reserve (Fed) delaying the policy pivot following the upbeat labor market data. The modest improvement seen in risk sentiment makes it difficult for the USD to outperform its rivals and helps EUR/USD edge higher. Meanwhile, the data from Germany showed that Factory Orders rose 8.9% (seasonally adjusted) on a monthly basis in December and further supported the euro.

The ECB’s tightening of monetary policy between the summer of 2022 and September 2023 continued to have its effects on euro zone bank lending in the fourth quarter of 2023. However, in the absence of a further turn of the screw since September 2023, these effects have not intensified further. Outstanding bank loans to the private sector even accelerated slightly, year-on-year, in the fourth quarter (up 0.5% in December 2023 compared to 0.3% in September) in line with GDP (up 0.1% in the fourth quarter from 0.0% in the third). The credit impulse remains negative but increased slightly for the first time since the ECB began to increase rates in July 2022. The 157 banks surveyed by the ECB between 8 December 2023 and 2 January 2024 indicated that they had slightly tightened conditions for loans to businesses. The main reasons cited were risk perceptions related to the economic outlook and the situation of firms. The deceleration in business lending outstanding (+0.33% y/y in December 2023, from +3.8% in December 2022) resulted from the delayed effects of cumulative rate rises since 2022 and a fall in demand. The latter particularly affected long-term loans and investment expenditure. Having hit bottom in… Read More »Eurozone: The slowdown in bank lending is having palpable effects on activity and inflation

The Fed, the ECB and other central banks have signalled that market expectations for rate cuts are too aggressive and, together with strong data for not least the US labour market, those expectations have calmed somewhat. Nordic economies are more or less stagnant but not in real decline, and job markets remain rather strong. Swedish inflation is coming down rapidly from its high levels. We are back to seeing a strengthening USD and weakening Nordic currencies, while the atmosphere is constructive among borrowers in the bond market and relating to equities The divergence in economic activity between the US and the euro area continued in the fourth quarter of 2023. The US economy grew 0.8% q/q while economic activity stagnated in the euro area. This brought the 2023 GDP growth rate to 2.5% in the US and to 0.5% in the euro area. One reason for the growth divergence last year was strong private consumption in the US. However, the labour markets are historically strong in both places. The unemployment rate in the euro area remained at 6.4% in December and the US nonfarm employment surprised all expectations in January by increasing 353k plus an upward revision of 126k in… Read More »Executive briefing: Central Banks push back on rate cut expectations

Gold price treads water near $2,025 early Tuesday after hitting a weekly low on Monday. US Dollar, Treasury bond yields take a breather as risk sentiment improves. The tide seems to have turned against Gold buyers, as the daily RSI flips bearish. Gold price is keeping its tepid recovery mode intact near $2,025 in the Asian session on Monday, having hit a weekly of $2,015 on Monday. The US Dollar (USD) is seeing a pullback from multi-month highs alongside the US Treasury bond yields, allowing Gold sellers to take a breather. Fedspeak to steal the spotlight amid a data-light US docket  Strong US Nonfarm Payrolls report combined with the hawkish rhetoric maintained by the US Federal Reserve (Fed) Chairman Jerome Powell dialed back expectations of aggressive Fed rate cuts this year, propping up the US Dollar and the US Treasury bond yields at the expense of the non-interest-bearing Gold price. Friday’s US labor market report showed that the US economy added a whopping 353K jobs in January, against the 180K expected. Fed Chair Jerome Powell, in an interview aired early Monday, dismissed a rate cut next month while pushing back against the timing of the rate cuts. Early Monday, Gold… Read More »Gold Price Forecast: XAU/USD looks to Fedspeak, as technicals flip bearish

AUD/USD breaks below the 0.6500 support on Monday. The stronger Dollar puts AUD under extra pressure. The RBA is widely expected to keep its OCR unchanged. The beginning of a new trading week saw relentless selling pressure on the Aussie dollar, pushing AUD/USD to the sub-0.6500 zone for the first time since mid-November. Furthermore, the pair declined for the second consecutive session and entered its sixth consecutive week of losses influenced by marked gains in the Greenback as market participants continued to digest Friday’s US Nonfarm Payrolls (+353K jobs) and hawkish remarks from Chair Powell over the weekend. Also weighing on Australian currency emerged the lack of positive surprise from the release of the Chinese Services and Composite PMIS tracked by Caixin and published during early trade. In addition, the ongoing downward movement in spot convincingly breached the critical 200-day SMA (0.6573), indicating the potential for the bearish trend to persist, at least in the short term. There was also no reaction in AUD after the China Securities Regulatory Commission restated its commitment on Sunday to encourage the inflow of medium- and long-term funds into the market. Additionally, they pledged to take strong measures against illegal activities, including malicious short… Read More »AUD/USD Forecast: RBA to the rescue?

XAU/USD Current price: 2,023.15 Continued upward pressure in government bond yields underpins the US Dollar. Upbeat United States data further weighed on March rate cut odds. XAU/USD retreated further on broad US Dollar’s strength, returned to its comfort zone. XAU/USD is under strong selling pressure on Monday amid broad US Dollar’s strength. The Greenback extends the rally triggered last week by the United States (US) Federal Reserve (Fed) monetary policy decision and upbeat employment figures. On the one hand, Fed Chair Jerome Powell dismissed the odds for a March rate cut, spurring risk aversion. On the other hand, the Nonfarm Payrolls (NFP) report was much stronger than expected, further diminishing the chance of a soon-to-come rate cut. At the beginning of the new week, government bond yields resumed their advances, underpinning the US Dollar in a much quieter week regarding macroeconomic releases. At the time of writing, the 10-year Treasury note offers 4.16%, up roughly 14 basis points (bps), while the 2-year note yields 4.47%, up 10 bps from Friday’s close. Meanwhile, stock markets changed course. After spending most of the day in the green, European indexes ended the day in the red. As per Wall Street, the three major… Read More »Gold Price Forecast: XAU/USD flirts with $2,020 as USD strength persists