Tag: Macroeconomics

  • XAU/USD loses ground below ,700 amid firmer US Dollar

    XAU/USD loses ground below $2,700 amid firmer US Dollar


    • Gold price loses ground to around $2,690 in Monday’s early Asian session.
    • The upbeat US job report and surging USD weigh on the Gold price. 
    • Trump’s policy uncertainty and geopolitical risks might cap the downside for the precious metal.

    Gold price (XAU/USD) trades with mild losses near $2,690 on the stronger US Dollar (USD) broadly during the early Asian session on Monday. However, the safe-haven demand due to uncertainty surrounding the President-elect Donald Trump administration’s policies might help limit the Gold’s losses. 

    The stronger-than-expected US employment data on Friday reinforced expectations that the US Federal Reserve (Fed) might not cut interest rates as aggressively this year. This, in turn, weighs on the non-yielding asset. Traders expect the Fed to cut interest rates by just 30 basis points (bps) over the course of this year, compared with cuts worth about 45 bps before the NFP report. 

    On the other hand, Trump’s policy risks boosting the Gold price, a traditional safe-haven asset. “Gold is still acting resilient in the face of a much stronger-than-expected jobs report … One of the factors that’s been supporting gold is this uncertainty that we’ve seen going into the (U.S. presidential) inauguration,” said David Meger, director of metals trading at High Ridge Futures.

    Additionally, the escalating geopolitical tensions in the Middle East and the ongoing Russia-Ukraine conflict might contribute to the precious metal downside. Israeli strikes continued throughout Gaza, including attacks near Gaza City, Nuseirat, and Bureij. Two attacks were also reported in the Houmin Valley in southern Lebanon, according to Lebanon’s National News Agency.

    Gold FAQs

    Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.

    Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.

    Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.

    The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.

     



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  • Australian Dollar holds steady as US Dollar remains firm ahead of FOMC Minutes


    • The Australian Dollar depreciated as Australia’s trimmed mean fell to an annual 3.2% from 3.5%.
    • Australia’s monthly Consumer Price Index increased by 2.3% YoY in November, the highest level recorded since August.
    • The US Dollar appreciated as the 10-year yield on US Treasury bonds rose by over 1% on Tuesday.

    The Australian Dollar (AUD) faced challenges for the second consecutive session against the US Dollar (USD), with the AUD/USD pair holding losses despite stronger-than-expected monthly inflation data released on Wednesday. Traders are now focused on the upcoming FOMC Minutes, scheduled for release later in the day, as well as the US jobs data, including the Nonfarm Payroll (NFP) report on Friday, for additional insights into policy direction.

    However, the trimmed mean, a closely watched measure of core inflation, fell to an annual 3.2% from 3.5%, edging closer to the Reserve Bank of Australia’s (RBA) target band of 2% to 3%. Traders are currently pricing in a 55% probability that the RBA will lower its cash rate by 25 basis points to 4.35% in February, with a full quarter-point cut expected by April.

    Australia’s monthly Consumer Price Index (CPI) rose 2.3% year-over-year in November, surpassing the market forecast of 2.2% and marking an increase from the 2.1% rise seen in the previous two months. This is the highest reading since August. However, the figure remains within the RBA’s target range of 2–3% for the fourth consecutive month, aided by the ongoing impact of the Energy Bill Relief Fund rebate.

    The Australian Bureau of Statistics reported on Tuesday that permits for new construction projects in Australia dropped by 3.6% month-on-month to 14,998 units in November 2024, falling short of market expectations for a 1.0% decline. This downturn followed an upwardly revised 5.2% increase in October, marking the first decrease in three months.

    The People’s Bank of China (PBoC) is collaborating with the State Planner to bolster the country’s economy. PBoC official Peng Lifeng announced that the central bank will assist banks in expanding loans under the trade-in initiative.

    Australian Dollar declines due to hawkish shift in Fed’s rate trajectory

    • The US Dollar Index (DXY), which measures the US Dollar’s (USD) performance against six major currencies, holds its position above 108.50 at the time of writing.
    • The US Dollar strengthened as the 10-year yield on US Treasury bonds rose by over 1% in the previous session, currently standing at 4.67%. This spike is a stark reminder of the shifting investor sentiment regarding the Federal Reserve’s interest rate trajectory.
    • The US ISM Services PMI increased to 54.1 in November, up from 52.1, exceeding the market expectation of 53.3. The Prices Paid Index, which reflects inflation, rose significantly to 64.4 from 58.2, while the Employment Index dipped slightly to 51.4 from 51.5.
    • The US ISM Manufacturing PMI improved to 49.3 in December, from 48.4 in November. This reading came in better than the market expectation of 48.4.
    • According to Bloomberg, Federal Reserve Bank of Atlanta President Raphael Bostic stated on Tuesday that Fed officials should exercise caution with policy decisions due to uneven progress in reducing inflation. Bostic emphasized the need to lean toward keeping interest rates elevated to ensure the achievement of price stability goals.
    • Richmond Fed President Thomas Barkin highlighted on Friday that the benchmark policy rate should remain restrictive until there is greater confidence that inflation will return to the 2% target.
    • Fed Governor Adriana Kugler and San Francisco Fed President Mary Daly underscored the challenging balancing act facing US central bankers as they aim to slow the pace of monetary easing this year.
    • Traders are cautious regarding President-elect Trump’s economic policies, fearing that tariffs could increase the cost of living. These concerns were compounded by the Federal Open Market Committee’s (FOMC) recent projections, which indicated fewer rate cuts in 2025, reflecting caution amid persistent inflationary pressures.

    Technical Analysis: Australian Dollar moves below nine-day EMA toward 0.6200

    AUD/USD trades near 0.6210 on Wednesday, maintaining its bearish outlook as it remains confined within a descending channel on the daily chart. The 14-day Relative Strength Index (RSI) retreats toward the 30 level, signaling a potential intensification of bearish momentum.

    On the downside, the AUD/USD pair may navigate the region around the lower boundary of the descending channel, at the 0.5990 level.

    The AUD/USD pair may test the immediate resistance around the nine-day Exponential Moving Average (EMA) at 0.6224, followed by the 14-day EMA at 0.6239. A further barrier appears around the upper boundary of the descending channel, at 0.6270 level.

    AUD/USD: Daily Chart

    Australian Dollar PRICE Today

    The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies today. Australian Dollar was the strongest against the Japanese Yen.

      USD EUR GBP JPY CAD AUD NZD CHF
    USD   -0.06% -0.02% 0.22% -0.06% 0.00% 0.03% -0.00%
    EUR 0.06%   0.04% 0.26% -0.01% 0.06% 0.09% 0.05%
    GBP 0.02% -0.04%   0.26% -0.05% 0.02% 0.05% 0.01%
    JPY -0.22% -0.26% -0.26%   -0.28% -0.21% -0.19% -0.22%
    CAD 0.06% 0.00% 0.05% 0.28%   0.07% 0.10% 0.06%
    AUD -0.01% -0.06% -0.02% 0.21% -0.07%   0.03% -0.01%
    NZD -0.03% -0.09% -0.05% 0.19% -0.10% -0.03%   -0.04%
    CHF 0.00% -0.05% -0.01% 0.22% -0.06% 0.00% 0.04%  

    The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Australian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent AUD (base)/USD (quote).

    Economic Indicator

    FOMC Minutes

    FOMC stands for The Federal Open Market Committee that organizes 8 meetings in a year and reviews economic and financial conditions, determines the appropriate stance of monetary policy and assesses the risks to its long-run goals of price stability and sustainable economic growth. FOMC Minutes are released by the Board of Governors of the Federal Reserve and are a clear guide to the future US interest rate policy.

    Read more.

    Next release: Wed Jan 08, 2025 19:00

    Frequency: Irregular

    Consensus: –

    Previous: –

    Source: Federal Reserve

     



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  • WTI rises above $74.00 on larger drop in US crude oil inventories, hopes for China’s demand


    • WTI price gains traction to near $74.15 in Wednesday’s Asian session.
    • US crude oil inventories fell by 4.022 million barrels last week, according to the API. 
    • Oil traders brace for the FOMC Minutes on Wednesday ahead of the US December NFP report. 

    West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $74.15 on Wednesday. The WTI price edges higher amid expected higher Chinese demand and a larger drop in US crude stocks. 

    A large drop in US crude inventories last week provides some support to the WTI. The API weekly report showed crude oil stockpiles in the United States for the week ending January 3 fell by 4.022 million barrels, compared to a decline of 1.442 million barrels in the previous week. The market consensus estimated that stocks would decrease by 250,000 barrels. Furthermore, the escalating geopolitical tensions in the Middle East and ongoing Russia-Ukraine conflicts could boost the WTI price in the near term. 

    On Tuesday, the National Development and Reform Commission (NDRC), China’s top economic planner, issued a guideline for building a unified national market, breaking down market barriers to boost domestic demand while enhancing openness. The positive development surrounding the Chinese stimulus measure could boost the black gold price as China is the world’s second-largest economy. 

    ”While the market is currently range-bound, it is recording gains on the back of improved demand expectations fuelled by holiday traffic and China’s economic pledges,” Hilal said in a morning note. “However, the primary trend remains bearish.”

    Looking ahead, Oil traders will keep an eye on the Minutes of the Federal Open Market Committee (FOMC), which is due later on Wednesday. On Friday, the US employment data for December will be in the spotlight. Economists expect 154,000 new jobs for December, while the unemployment rate is expected to remain at 4.2% during the same report period. In case of a stronger-than-expecetd outcome, this could lift the Greenback and weigh on the USD-denominated commodity price in the near term. 

    Gold FAQs

    Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.

    Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.

    Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.

    The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.

     



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  • NZD/USD softens below 0.5650 on stronger US economic data


    • NZD/USD softens to around 0.5635 in Wednesday’s early Asian session. 
    • The stronger US data suggested the Fed is likely to slow the easing cycle. 
    • Investors will monitor how aggressive Trump’s tariff plans could be when he takes office.

    The NZD/USD pair trades with mild losses near 0.5635 during the early Asian session on Wednesday. The upbeat US Services Purchasing Managers Index (PMI) for December suggested that the Federal Reserve (Fed) will likely slow the pace of its easing cycle, supporting the US Dollar (USD). Later on Wednesday, the Minutes of the Federal Open Market Committee (FOMC) will be in the spotlight. 

    The services sector activity in the United States accelerated in December. Data released by the Institute for Supply Management (ISM) showed that Services PMI increased to 54.1 in December from 52.1 in November. This reading came in stronger than the estimation of 53.3. 

    Meanwhile, US job openings unexpectedly increased in November, although hiring slowed during the month. US JOLTS Job Openings rose to 8.09 million in November versus 7.83 million prior and came in above the market consensus of 7.7 million.

    The reports indicated a generally stable jobs market and a still robust services sector, which might convince the Fed to slow the pace of rate cuts, lifting the Greenback. According to the CME FedWatch tool, the US rate futures market has priced in a 93.5% chance of a pause in rate cuts this month. 

    Investors will monitor how aggressive President-elect Donald Trump’s tariff policies could be when he takes office. Analysts believe that if US tariffs are broadly lower than Trump promised on the campaign trail and aimed only at “critical” sectors, then the outlook for global growth should improve and the USD should weaken. Additionally, the supportive measures from China could boost the Kiwi as China is a major trading partner for New Zealand. 

    New Zealand Dollar FAQs

    The New Zealand Dollar (NZD), also known as the Kiwi, is a well-known traded currency among investors. Its value is broadly determined by the health of the New Zealand economy and the country’s central bank policy. Still, there are some unique particularities that also can make NZD move. The performance of the Chinese economy tends to move the Kiwi because China is New Zealand’s biggest trading partner. Bad news for the Chinese economy likely means less New Zealand exports to the country, hitting the economy and thus its currency. Another factor moving NZD is dairy prices as the dairy industry is New Zealand’s main export. High dairy prices boost export income, contributing positively to the economy and thus to the NZD.

    The Reserve Bank of New Zealand (RBNZ) aims to achieve and maintain an inflation rate between 1% and 3% over the medium term, with a focus to keep it near the 2% mid-point. To this end, the bank sets an appropriate level of interest rates. When inflation is too high, the RBNZ will increase interest rates to cool the economy, but the move will also make bond yields higher, increasing investors’ appeal to invest in the country and thus boosting NZD. On the contrary, lower interest rates tend to weaken NZD. The so-called rate differential, or how rates in New Zealand are or are expected to be compared to the ones set by the US Federal Reserve, can also play a key role in moving the NZD/USD pair.

    Macroeconomic data releases in New Zealand are key to assess the state of the economy and can impact the New Zealand Dollar’s (NZD) valuation. A strong economy, based on high economic growth, low unemployment and high confidence is good for NZD. High economic growth attracts foreign investment and may encourage the Reserve Bank of New Zealand to increase interest rates, if this economic strength comes together with elevated inflation. Conversely, if economic data is weak, NZD is likely to depreciate.

    The New Zealand Dollar (NZD) tends to strengthen during risk-on periods, or when investors perceive that broader market risks are low and are optimistic about growth. This tends to lead to a more favorable outlook for commodities and so-called ‘commodity currencies’ such as the Kiwi. Conversely, NZD tends to weaken at times of market turbulence or economic uncertainty as investors tend to sell higher-risk assets and flee to the more-stable safe havens.

     

     

     

     



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