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On January 29th, the US Treasury yield curve steepened for the second consecutive trading day, primarily driven by a weaker dollar and stronger oil prices, both of which boosted inflation expectations. The 2-year/10-year Treasury yield spread widened to 67.6 basis points at one point, up from 66.6 basis points at the close on Tuesday. The yield curve exhibited a typical "bear market steepening" characteristic, where longer-term yields rise faster than shorter-term yields as investors price in the risk of renewed inflation acceleration. Gunnett Dingela, Head of US Interest Rates Strategy at BNP Paribas, stated, "Weaker dollars typically lead to longer-term yields becoming more sensitive to inflation risks. Therefore, the dollar and Treasuries often act as pressure relief valves for the combination of monetary and fiscal policies. If the combination of fiscal and monetary policies suggests that the dollar will continue to weaken, then I think the rise in long-term yields is a textbook reaction."The German DAX 30 index closed down 91.30 points, or 0.37%, at 24,816.93 on Wednesday, January 28; the UK FTSE 100 index closed down 55.50 points, or 0.54%, at 10,152.30 on Wednesday, January 28; and the French CAC 40 index closed down 86.14 points, or 1.06%, at 8,066.68 on Wednesday, January 28; European The Stoxx 50 index closed down 62.53 points, or 1.04%, at 5932.06 on Wednesday, January 28; the Spanish IBEX 35 index closed down 206.52 points, or 1.16%, at 17597.58 on Wednesday, January 28; and the Italian FTSE MIB index closed down 343.94 points, or 0.76%, at 45096.50 on Wednesday, January 28.The percentage of winning bids for the 4-month U.S. Treasury bonds auctioned as of January 28 was 45.62%, compared to 50.47% previously.The bid-to-cover ratio for the US 4-month Treasury bond auction ending January 28 was 2.92, compared to 2.99 previously.The US 4-month Treasury auction on January 28th yielded a winning bid of 3.59%, compared to 3.58% previously.

Forecast for Gold Price: XAU/USD consolidates above $2,000 as investors await initial US S&P PMI data

Daniel Rogers

Apr 21, 2023 13:52

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During the Asian session, the price of gold (XAU / USD) is oscillating above the psychological resistance of $2,000.00. After a gradual increase, the price of gold has leveled off near $2,005.00 as investors await the release of preliminary S&P PMI data for the United States.

 

S&P500 futures have added some gains during the Asian session following three consecutive declines. As a result of Elon Musk's price-cutting frenzy, Tesla's revenue projections were gloomy, which dampened market sentiment. Near 101.77, the US Dollar Index (DXY) has extended its correction. The USD Index has been consolidating in a range between 100.90 and 102.03 for the past several trading sessions. Therefore, a move that exceeds the previously specified limit will be considered decisive.

 

The subdued USD index weighs on US Treasury yields as well. The demand for U.S. government bonds has increased as weekly unemployment claims have increased. The number of individuals claiming unemployment benefits rose to 245K, exceeding the consensus estimate of 240K. This indicated a softening in the labor market and bolstered expectations that the Federal Reserve (Fed) will not raise interest rates after the monetary policy meeting in May.

 

In the future, the publication of the preliminary US S&P PMI data will determine the impact of the Fed's rate hikes on the scope of economic activity. According to projections, the Manufacturing PMI and Services PMI will decline to 49.0 and 51.5, respectively. A preliminary PMI reading that is weaker than anticipated could impact heavily on the U.S. dollar.

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