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On March 10th, European Central Bank (ECB) Governing Council member Matthew Mueller stated that the likelihood of a near-term interest rate hike has increased, but officials should not react hastily to the Iran war and its impact. He said, "The probability of the next change in the policy rate is now more inclined towards an upward rather than a downward adjustment. This probability may have increased in the past few weeks." However, he also stated that the ECB should not "make any hasty decisions," adding, "We should first observe whether the current rise in energy prices is merely temporary." As the Middle East conflict has driven up energy prices, traders have increased their bets on monetary policy tightening. However, after initially pricing in two rate hikes this year, each by 25 basis points, these bets have fallen back to less than one after Trump hinted that the conflict might end soon. ECB Governing Council member Marc-André Simkus also warned against hasty action. He said, "Remain calm and do not overreact, because things are still evolving. If the situation continues, if the conflict spreads, it will not only affect inflation but also have a broader impact on the Middle East and Europe."Saudi Aramco CEO: Of the 7 million barrels per day capacity of the East-West pipeline, nearly 2 million barrels per day will be delivered to domestic refineries in the west, some of which have export capabilities.Volkswagen CEO: We need to work harder; our costs are still too high.Volkswagen CEO: Production costs at the three major German factories have been reduced by 20%.European Council President Costa: The EU calls on all parties to the Middle East war to exercise maximum restraint and return to the negotiating table.

Gold Price Prediction: XAU / USD corrects to around $1,910 despite intensifying concerns of a global banking crisis

Alina Haynes

Mar 16, 2023 14:00

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After reaching a new six-week high at $1,937.39, the gold price (XAU/USD) displayed a corrective move during the Asian session. As gold's allure is extremely strong amid growing concerns about the global banking crisis, a correction in the precious metal appears to be short-lived. Credit Suisse's debacle following the failure of Silicon Valley Bank (SVB) has triggered the risk of global financial instability, and uncertainty over the Federal Reserve's (Fed) upcoming interest rate decision has bolstered the case for the Gold price.

 

S&P500 futures have shown a recovery move following Wednesday's sell-off as investors assess the banking sector's uncertainty. However, the motif of risk aversion has not yet completely subsided.

 

During the Asian session, the US Dollar Index (DXY) is fluctuating in a narrow range of around 104.60. It appears that the impact of banking sector turmoil is maturing for the USD Index, and investors are beginning to discount expectations for next week's monetary policy. According to the CME FedWatch instrument, the probability that Fed chair Jerome Powell will raise interest rates by 25 basis points (bps) has risen above 70%. While 30% of the probabilities support maintaining the current interest rate policy.

 

Increasing odds of a status quo monetary policy are supported by a declining Consumer Price Index (CPI), a rising Unemployment Rate, sluggish Retail Sales, and a declining Producer Price Index (PPI).


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