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On August 26, European Central Bank Executive Board member Schnabel stated that the protracted Middle East conflict, coupled with unexpectedly strong Eurozone economic performance, poses upside risks to inflation, necessitating further interest rate hikes. Consumer price increases could exceed 2% for an "extended period," and policymakers will be behind the curve if action is delayed until these effects are transmitted to wages. She stated, "At current interest rates, inflation is unlikely to return to the target level in the medium term, thus requiring further policy tightening. Especially given the current resilient aggregate demand, preventing a second round of effects early is crucial, as acting too late may require more aggressive tightening measures." She pointed out that fiscal policy, increased defense spending, and the global AI boom are key drivers of strong economic growth. Schnabel warned that energy price pressures, excluding oil, are becoming more persistent. Given low European gas inventory levels, the gas market is particularly worrying, "posing a substantial upside risk to inflation. The longer the conflict lasts, the greater the risk and intensity of indirect and second-round effects."ANZ Bank now expects the Reserve Bank of Australia to raise interest rates by 25 basis points in November.August 26th - As markets closely watch for clues about the timing of the Bank of Japans next interest rate hike, BOJ watchers will be closely monitoring Deputy Governor Ryozo Himinos speech on Thursday. SMBC Nikko Securities strategist Ataru Okumura stated, "While there are limitations to how much a single speech by a BOJ deputy governor can guide market expectations, the focus will be on how firm his wording is on controlling inflation." Okumura added that although the bond market firmly expects the BOJ to raise rates sooner rather than later, investors doubt the banks ability to push rates above the restrictive level of 2%, making the future path of interest rates a key focus for the market.August 26th - According to the Financial Times, US Treasury Secretary Bessetts intervention in the bond market runs counter to the Federal Reserves efforts to curb inflation. Bessetts unexpected intervention in the US Treasury market caused yields to initially fall before rising, triggering a market reaction that puts greater pressure on Warshs speech in Jackson Hole on Friday. Warsh has consistently emphasized that investors should rely more on economic data and market prices rather than waiting for "forward guidance" from central bank officials to tell the market about future interest rate trends. There are now concerns that if Bessetts efforts to control yields remain ineffective, the Federal Reserve may also face pressure to intervene in the market. Warsh and Bessett are both protégés of billionaire Stanley Druckenmiller, and the two reportedly have a close relationship and meet frequently. However, the current impression is that their respective Treasury departments and the Federal Reserve are "moving in opposite directions."ECB Executive Board member Schnabel: At the current policy rate, inflation is unlikely to return to the target level in the medium term, and further tightening of policy will be necessary.

Prediction of Silver Price - Silver prices maintained their uptrend due to a lower currency and decreasing yields

Daniel Rogers

May 25, 2022 10:00

As investors continue to harbor inflationary concerns, silver prices increased. On Tuesday, gold prices increased further as the US dollar fell to a one-month low. The dollar's decline from multi-year highs has persisted.

 

In the market, aggressive Fed tightening has already been priced in. Today, benchmark rates declined as the stock market sell-off from the previous week resumed. Today, the yield on ten-year bonds fell by 12 basis points and traded above a level not seen since late 2018. Oil prices increased due to fears of a supply shortage.

 

The European Union is negotiating a ban on oil imports from Russia. An embargo will likely mitigate the effect of the lifting of limitations in China and the increase in US oil production on the growth of demand.

 

The US Flash Manufacturing PMI for the month of May came in at 57.5, while the Dow Jones forecast was for 57.4. However, the US Flash Services PMI came in at 53.5, 1.5 points lower than anticipated.

 

These important economic indicators indicate that rising inflation has had a negative impact on supply and demand for goods and services. Fed Chair Powell is scheduled to talk today and will likely reiterate the Fed's intention to raise interest rates to rein in inflation despite the economy's obvious weakness. 

Technical Evaluation

Maintaining a positive outlook, silver prices remain high and stable at $22 per ounce. The XAG/USD pair maintains its uptrend above the 200-day moving average. A sinking dollar and poor economic data support the precious metal's bullish trend.

 

Near the 10-day moving average of $21.56 is viewed as support. Near the 200-day moving average of 23.58 is observed to be a region of resistance. The short-term momentum is bullish, since the fast stochastic signaled a buy crossing.

 

The medium-term momentum turns positive when the histogram and MACD both show positive values (moving average convergence divergence). The MACD histogram is moving in a positive direction, indicating an upward trend in price movement.

 

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