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Futures data from September 17th: Spot gold prices surged above the 3,700 mark overnight, with COMEX gold futures rising 0.23% to $3,727.50 per ounce, and SHFE gold futures closing up 0.19%. Expectations of a Federal Reserve rate cut, a weakening dollar, and geopolitical uncertainty are all contributing to golds performance. Focus is on the Federal Reserves September meeting and the subsequent Quarterly Economic Projections (SEP). The US dollar continued to weaken on Tuesday, with the US dollar index falling 0.74% to a low of 96.54, hitting a near two-month low. Furthermore, the dollar fell 0.9% against the euro, reaching its lowest level since September 2021. Regarding economic data, US retail sales for August, released on Tuesday, rose 0.6% month-over-month, exceeding expectations of a 0.2% increase. The previous reading was revised from 0.5% to 0.6%, demonstrating resilience in consumer spending. The Federal Reserve held its meeting early Thursday morning, and a rate cut is all but certain. With the US Presidents newly nominated Fed Governor, Milan, participating in the FOMC meeting, the published dot plot is expected to show a more dovish tone, with the number of rate cuts for 2025 expected to fluctuate between two and three. Furthermore, continued pressure from the White House on Powell and other governors is crucial. Concerns about the Feds independence may continue to exacerbate market volatility.According to the Wall Street Journal: Eli Lilly (LLY.N) will invest $5 billion to build a factory in Virginia, USA.Japanese Ministry of Finance: Japans exports to the United States fell 13.8% year-on-year in August; exports to the European Union increased 5.5% year-on-year in August.Japans seasonally adjusted merchandise trade account in August was -150.125 billion yen, compared with expectations of -341.3 billion yen and the previous value of -303 billion yen.Japans annualized rate of merchandise imports in August was -5.2%, in line with expectations of -4.2%. The previous value was revised from -7.50% to -7.40%.

EURJPY is trading below 146.50 as hawkish ECB bets increase

Daniel Rogers

Nov 10, 2022 18:40

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Following a modest decline to approximately 146.40 during the Tokyo session, the EURJPY pair has witnessed resumed purchasing. Once the cross above the immediate barrier of 146.70, the trend may change to a positive trajectory. S&P500 futures have significantly risen as the positive risk urge gains strength. In addition, long-term US Treasury yields are under pressure due to greater expectations of a lower Federal Reserve (Fed) rate hike than in the past.

 

As bets on a hawkish monetary policy by the European Central Bank (ECB) have strengthened, the Shared Currency bulls are gaining ground. As the Harmonized Index of Consumer Prices (HICP) lingers near double digits, Christine Lagarde, president of the European Central Bank (ECB), may decide to continue raising interest rates.

 

A research conducted by the ECB to assess consumer inflation expectations, assuming respondents continue to anticipate inflation of 3% in three years and 5.1% in the coming year.

 

During an interview in Riga, Bloomberg reported that ECB Governing Council member Martins Kazaks prefers not to dictate an interest rate ceiling. He added that borrowing costs "remain substantially below where they should be" and must rise to levels that reflect monetary tightening, not just a reduction in stimulus.

 

In the meantime, Governor Haruhiko Kuroda of the Bank of Japan (BOJ) has remarked that it is premature to consider the end of ultra-dovish interest rate policy. In an effort to raise aggregate demand, the administration has unveiled two distinct stimulus measures this week. Therefore, it looks unlikely that an ultra-dovish monetary policy will be abandoned.


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