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On August 12th, a Reuters Tankan survey showed that Japans manufacturing confidence index rose to 18 in August from 13 in July, reaching its highest level since March 2026. During the same period, supported by strong domestic consumption, the non-manufacturing confidence index also rose from 25 to 28. The outlook for the next three months suggests that market sentiment will ease somewhat. Semiconductor-related demand was the main driver of the market rally, especially the significant jump in the chemical and metal machinery sub-indices, indicating that the strong momentum in the semiconductor supply chain is continuing to spread across Japans entire industrial base, rather than remaining concentrated in the hands of a few chip manufacturers. The manufacturing index reaching its highest level since March indicates that the previous drag on chip-related exporters from global trade uncertainty has largely subsided. In contrast, the transportation equipment industry index remained at 0, showing that the automotive industry has not yet significantly benefited from the recovery trend.National Australia Bank: We still expect the Reserve Bank of Australia to keep the cash rate unchanged for the remainder of 2026, and the first rate cut is still expected to take place around mid-2027.On August 12th, Westpac Chief Economist Luci Ellis stated that the Reserve Bank of Australias (RBA) decision to keep interest rates unchanged was in line with market expectations, but the change in its policy guidance is more noteworthy than the rate decision itself. Westpac believes that the RBAs statement that it is prepared to raise rates "only if upside risks to inflation materialize" is clearer than the broader "if necessary" wording used in the May meeting. Even without explicit statements, the RBA has effectively lowered its rate hike expectations. Westpacs base case has shifted to maintaining interest rates unchanged until the middle of next year. This view is based on inflation and labor market data, both of which are lower than the RBAs May forecasts. Nevertheless, Westpac cautiously describes this as a "hawkish pause" rather than a "loosening of interest rate controls." Further rate hikes are still possible for the remainder of the year, although less likely, depending primarily on the transmission effects of energy-related costs and developments in the Middle East.Japans Reuters Tankan Manufacturing Sentiment Index for August was 18, down from 13 in the previous month.Japans Reuters Tankan non-manufacturing business sentiment index for August was 28, down from 25 in the previous month.

Gold Falls Below $1,900; The dollar Soars As The Fed Prepares to Double Its Rate Hikes

Charlie Brooks

Apr 26, 2022 09:57

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On Monday's session on the New York Comex, an ounce of the yellow gold returned to the $1,800 level.


This came as the dollar strengthened on expectations that the Federal Reserve would hike rates by 50 basis points, or half a percentage point, at its May policy meeting next week — more than double the 25 basis points, or quarter point, approved in March, the first increase in the post-pandemic era in the United States.


On Monday, Comex front-month gold futures for June finished down $38.30, or 2%, at $1,896 an ounce. On April 18, June gold reached a six-week high of $2,003 on concerns that the US could enter recession as a result of strong Fed attempts to rein down inflation. Gold is frequently used as a hedge against economic and political uncertainty.


Over the last week, a series of Fed speakers assuaged market concerns that the economy would turn negative as a result of the central bank's efforts to contain price pressures developing at their highest rate in 40 years.


While fears of a hard landing have not completely vanished, optimism, particularly regarding the sterling job market, has won over some pessimists. This has resulted in the dollar surging – the primary beneficiary of a rate hike — at the expense of gold and other safe-haven assets.


The Dollar Index, which compares the US currency to six main rivals, touched a 25-month high of 101.745 on Monday.


US bond yields, which frequently move in lockstep with the dollar, have recently decoupled from the greenback. The yield on the US 10-year Treasury note fell for the third consecutive day, dropping about 4% on the day.


While risk aversion across the board drew investors to safe-haven assets, gold's near-term charts showed the possibility of a rebound to the $1,900 lows, at the very least, following the week's loss of more than $100. 


"Gold has begun to exhibit oversold conditions on a daily basis, which may result in a short-term relief rally, albeit not necessarily a reversal," Dixit explained. "The $1,925 to $1,935 level remains a hurdle, but a rebound is probable." If history is any guide, gold will almost certainly find buyers at lower prices."


On the other hand, he noted, a Comex settlement below $1,888 will exacerbate gold's troubles.

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