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January 17, gold prices hovered near a five-week high on Friday and are expected to rise for the third consecutive week as U.S. inflation data released earlier this week once again raised expectations that the Federal Reserve may cut interest rates more than once this year. Ajay Kedia, director of Kedia Commodities, said that the support level is expected to be $2,694, and if it breaks through $2,720, the price of gold will advance to $2,770. ANZ analysts said that gold will play its risk diversification appeal amid macroeconomic and geopolitical uncertainty. Golds sensitivity to its traditional drivers (interest rates and the U.S. dollar) will continue to fluctuate in 2025. Michael Langford, chief investment officer of Scorpion Minerals, said that the increased uncertainty brought about by the new U.S. administration and its possible actions is affecting gold as a tool for trading short-term fluctuations.The overnight repurchase rates of the Shanghai and Shenzhen Stock Exchanges both rose to above 6%, with GC001 rising by as much as 7% during the day.ECB board member Stournaras: According to the latest forecasts, inflation will approach the 2% target in a sustainable way starting from the second quarter of 2025.ECB board member Stournaras: If future data show that medium-term inflation is below target, the possibility of further interest rate cuts should not be ruled out.ECB board member Stournaras: Due to increased uncertainty, our actions should be gradual and cautious, and continue to be based on available data.

As the Fed confirms the disinflationary process, the USD/CAD exchange rate may fall to 1.3250

Alina Haynes

Feb 02, 2023 16:05

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The USD/CAD pair resumed its two-day losing run after slipping below 1.3270 in Asia. Following two days of declining US inflation, the Canadian dollar fell on Wednesday.

 

The US Manufacturing PMI (Jan) dropped for a third consecutive month to 47.4, below the consensus estimate of 48.0 and the prior reading of 48.4. The Index of New Orders for Manufactured Goods, which indicates future demand, decreased to 42.5 from 46.1 and 45.1. Fed Chairman Jerome Powell stated in his comments that consumer spending has slowed significantly and that the central bank will now focus on labor cost balance. The US Employment Cost Index (Q4) fell by 1%.

 

The US Consumer Price Index (CPI) and Producer Price Index (PPI) have decreased for three consecutive months, while economic activity and consumer spending have slowed, signaling deflation. Powell stated, "Can now for the first time announce, 'The disinflationary process has begun.'"

 

The market participants' risk appetite has raised the demand for risky assets. After a solid performance on Wednesday, S&P500 futures increased in the Asian morning. The US Dollar Index (DXY) found limits following a decline to about 100.80 amid risk-on market mood. The yield on 10-year US Treasuries has surpassed 3.41 percent.

 

Monthly GDP (Nov) data for the Canadian dollar were 0.1%, above the consensus forecast of flat. Since the Bank of Canada (BoC) ceased policy tightening after increasing interest rates to 4.50 percent, the Canadian economy has not declined on a monthly basis.

 

After plunging to nearly $76, the price of oil is recovering. Black gold dipped on Wednesday after the US Energy Information Administration (EIA) reported 4.14 million oil inventories for the week ending January 27. Because Canada is a major oil exporter to the United States, lower oil prices influence the Canadian Dollar.


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