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June 7th - As the conflict with Iran triggers global inflationary pressures, the European Central Bank (ECB) is expected to raise interest rates by 25 basis points next week, becoming the first major central bank among the G7 to tighten monetary policy. Markets anticipate at least one more rate hike this year. In contrast, the Bank of Canada is likely to keep its rates unchanged, while the Federal Reserve and the Bank of England are expected to remain on hold this month, observing the impact of the Iranian conflict. ECB officials aim to ensure that inflation in the Eurozone does not become deeply entrenched, but a rate hike would come at the cost of further dragging down an already weak economy. ECB President Christine Lagarde is likely to provide a clearer signal on the next steps at the press conference following the decision. Meanwhile, the ECB will also release its quarterly economic forecasts, assessing different scenarios of the energy shocks impact on the regional economy.On June 7th, Willie Walsh, Director General of the International Air Transport Association (IATA), stated that rising jet fuel prices are expected to lead to more airline bankruptcies and industry consolidation. He pointed out that a merger between United Airlines and American Airlines is unlikely due to regulatory hurdles. Walsh also stated that once the Middle East conflict subsides, airlines and hubs in the Gulf region will regain market share. Furthermore, despite disappointing progress in clean fuels, IATA remains committed to its 2050 net-zero emissions target.The Russian Ministry of Defense stated that its air defense forces intercepted 339 Ukrainian drones in multiple regions, including Moscow, within 13 hours.On June 7th, local time, the Russian Ministry of Defense stated on the 6th that Russian forces had seized control of the Shevchenko settlement in Kharkiv Oblast and struck 153 areas in Ukraine. These included production, storage, and launch sites for long-range drones; fuel, transportation, and port infrastructure; and temporary deployment points for Ukrainian armed forces and foreign mercenaries. The General Staff of the Ukrainian Armed Forces stated on the 6th that Ukrainian forces attacked targets including Russian personnel assembly areas, drone control points, and artillery systems.Ukrainian Foreign Minister Kuleba: Russian forces attacked two civilian search and rescue vessels in Ukrainian waters, causing casualties.

Gold Price Prediction: XAU/USD bears at $1,650 on Fed hawkishness and China news

Daniel Rogers

Sep 19, 2022 14:34

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During early Monday morning in Europe, the gold price (XAU/USD) maintains a position close to the intraday low at $1,670. In doing so, metal prices endure the weight of a stronger U.S. dollar amidst a sluggish session caused by Japanese and British vacations. The cause may be related to the Fed's hawkish bets and China-related news stories.

 

US Dollar Index (DXY) reverses a two-day slump while posting intraday gains of 0.18 percent at 109.85 as of press time. Indicators of the U.S. dollar's value versus the six major currencies have recently been buoyed by the University of Michigan's September consumer sentiment report and the market's positive expectations on the Fed's next move. Consequently, the probability of a 75-basis-point (bps) rate hike by the Federal Reserve increased to 80%, while the market's estimates of a one-percentage-point increase in the Fed rate rose to 20% at the latest.

 

US President Biden stated elsewhere, "I'm more positive than I've been in a long time." The national leader also claimed that inflation will be brought under control. On the same line are the covid updates from China, which have unlocked Dalian and Chengdu while observing zero coronavirus cases in Beijing and one, as opposed to zero the day before, outside of Shanghai's quarantine zone. However, US President Biden's willingness to support Taiwan in the event that China assaults Taiwan and hawkish expectations for the Federal Reserve appear to weigh on the steel price ahead of the major monetary policy pronouncements.

 

In addition, the People's Bank of China (PBOC) reduces the 14-day reverse repo rate by 10 basis points to 2.15 percent. "With no maturing reverse repos on Monday, the Chinese central bank injects 12 billion yuan," reports Reuters. The same might have indicated that the dragon nation is not in recovery mode and requires more rate cuts than rate raises, which could have caused the gold price to plummet. The cause is China's position as one of the world's largest gold consumers.

 

In light of this, the S&P 500 Futures post modest losses while mirroring Wall Street's Friday close. Notably, the selling in Japan curbs bond movements in Asia, but yields are robust near the multi-day high due to fears of a recession and hawkish Fed views.

 

Moving forward, a light economic calendar and important market holidays may limit intraday XAU/USD price fluctuations. However, bears are expected to maintain control because to aggressive Fed expectations, which, if dashed, might defy the bearish chart pattern and spark the long-awaited rally.

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