Gold Prices Rise: Global gold prices rose to over $2,400 per ounce during Wednesday trading.
This increase came just hours before the U.S. Federal Reserve’s (Fed) decision on interest rates was announced.
Global gold prices rose to over $2,400 per ounce during Wednesday’s trading.
This rise occurred just hours before the U.S. Federal Reserve’s decision on interest rates,
and the daily drop to the $2,400 level had a counteracting effect.
Additionally, slow global economic growth forecasts and the U.S. dollar’s drop from its three-week high supported gold prices.
Despite this, optimistic investors might hold back from making strong bets,
preferring to wait for more signals regarding the Fed’s path on lowering interest rates.
Therefore, the focus will remain on the outcome of the Federal Open Market Committee (FOMC) meeting,
with the interest rate decision expected to be announced later today.
Important Decisions at Today’s Fed Meeting
Federal Reserve officials are preparing to lower borrowing costs in the coming months.
Chairman Jerome Powell may hint at this move
at the end of today’s meeting amid rising risks to the labor market.
Fed Governors are expected to keep interest rates unchanged after two Tuesday and Wednesday meetings.
Rates will remain at their highest level in two decades. However, investors expect the Fed to lower interest rates in September.
Recent data has been encouraging, showing moderate price increases and strong economic growth.
However, the Fed wants more confirmation that inflation will continue to decline towards its 2% target.
The drop in price pressures and a rise in unemployment have balanced the Fed’s dual
mandate of maximum employment and price stability.
Officials aim to tame inflation but do not want to
cause undue harm to the labor market by keeping interest rates high for too long.
Bank of Japan Raises Interest Rates:
After its July monetary policy meeting, the Bank of Japan’s Monetary Policy Committee
raised the target for short-term interest rates by 15 basis points,
from the 0% – 0.1% range to the 0.15% – 0.25% range.
The Bank of Japan’s decision was contrary to the expectations
of many experts but aligned with the broader market expectations.
The market had priced at a more than 65% chance of a rate hike,
Experts mainly predicted that the Bank of Japan would keep the target interest rate range unchanged at this meeting.
The Yen’s Crazy Surge Threatened by Imminent Collapse: The Japanese yen, which has experienced a “crazy” surge, faces a significant threat of collapse in the near future.
The Bank of Japan (BOJ) and the Federal Reserve meetings will be crucial in determining the yen’s future trajectory.
The yen’srecent gains could vanish just as quickly if the BOJ does not raise interest rates.
However, unstable economic data and weak consumer spending may prevent the BOJ from making this move.
The Japanese yen, which has experienced a “crazy” surge, faces a significant threat of collapse in the near future.
The Bank of Japan (BOJ) and the Federal Reserve meetings will be crucial in determining the yen’sfuture trajectory.
The yen’srecent gains could vanish just as quickly if the BOJ does not raise interest rates.
However, unstable economic data and weak consumer spending may prevent the BOJ from making this move.
Investor Bets
Investors have flocked to buy the yenrecently,
betting that the interest rate differential between the United States and Japan will shift in favor of the latter.
They will face their moment of truth on Wednesday.
The yenis holding onto a nearly 5% gain against the dollar before it began rising on July 11,
a move bolstered by talk of BOJ intervention in the market. Some investors warn that the surge is fragile,
as evidenced by the yen’squick retreat from gains after stronger-than-expected U.S. economic growth figures.
Probability of Raising Interest Rates
Swap markets indicate a 43% chance that the BOJ will raise interest rates by 15 basis points
by the end of its monetary policy meeting on July 31, signaling considerable caution.
Only 30% of BOJ watchers polled by Bloomberg expect a rate hike,
even though over 90% see it as a risk.
This makes yenbulls vulnerable, especially if the BOJ also disappoints expectations
with a significant reduction in bond purchases or if the Federal Reserve
does anything later that day to dampen hopes for U.S. rate cuts in the coming months.
The Crazy Rise
Nick Twidale of ATFX Global Markets, who has been trading the Japanese currency for a quarter of a century, said:
“This is a crazy rise for the yen.
The BOJ could spoil the party and not play its role in tightening policy.”
Twidale added that if the BOJ does not meet market expectations, carry trades,
which profit from interest rate differentials and have kept the yen weak,
“could come back strongly.” Others, from BlackRock to former central bank officials,
expect the BOJ to keep rates steady for longer.
Economic Data
Unstable economic data lends credibility to this view:
while a key index tracking the strength of Japan’s service sector rebounded in July,
a measure of factory activity contracted.
People familiar with the matter say weak consumer spending complicates the BOJ’s decision this week.
Market Expectations
Amir Anvarzadeh, a strategist at Asymmetric Advisors who has tracked Japanese markets for over thirty years, said,
“If the BOJ does nothing, the dollar could rise against the yenagain.”
Nonetheless, the yen rose 0.2% to 153.62 against the dollar at 9:07 a.m.
in Tokyo, following a third month of accelerating inflation in the Japanese capital.
Demand for the Yen
After last week’s significant move, Nathan Sowell,
managing director of foreign exchange trading at Citigroupin Singapore,
saw additional demand for bullish yen options. He said:
“It’s still too early to tell if this signals a long-term shift in investor sentiment,
so it’s more likely to be a tactical shift in positioning or short-term hedging activity for now.”
State of Uncertainty
Other traders note that some hedge funds have stayed out of the market amid uncertainty
about how much the currency can gain before the BOJ’s policy meeting this week.
If the BOJ does not fully meet expectations,
The yencould weaken to 158 against the dollar, according to Rodrigo Catril of National Australia Bank.
Support for the BOJ’s Stance
However, even if the BOJ tightens policy on Wednesday,
there is still reason to support its stance in carry trades.
In these, investors use Japan’s ultra-low interest rates to borrow in yen and invest in higher-yielding currencies.
The yen’simplied yields would still be about 90 basis points
lower after a rate hike than those of the Swiss franc,
an alternative funding currency for carrying trades.
U.S. Interest Rate Risks
There are also many risks associated with U.S. interest rates.
If the chances of the Federal Reserve cutting rates diminish, the Japanese currency could face pressure again.
Charo Chanana, head of currency strategy at Saxo Capital Markets, said:
“The yen could test 160 if the Fed does not signal
rate cuts in September and U.S. data gains strength again.”
The Yen’s Crazy Surge Threatened by Imminent Collapse
Global gold prices declined: Decline in Gold Prices during Wednesday’s trading due to the stabilization of the US dollar and the rise in Treasury yields.
Gold Prices declined during Wednesday’s trading due to the stabilization of the US dollar and the rise in Treasury yields.
This comes ahead of announcing a series of critical inflation data in the United States,
which could provide further insights into the Federal Reserve’s interest rate path.
The US dollar index rose, making gold less attractive to holders of other currencies,
while the yields on 10-year US Treasury bonds rose to their highest levels in several weeks.
Rise in Oil Prices:
Oil prices rose in Asian trading on Wednesday as investors expected major producers to continue reducing production at their upcoming meeting on Sunday.
It is also anticipated that fuel consumption will increase with the start of peak demand season in summer.
Investors are also awaiting US crude oil inventory data to be released by the American Petroleum Institute later today.
The data release was delayed by one day due to Memorial Day on Monday.
On the New York Mercantile Exchange, crude oil contracts for July
were traded at $80.09 per barrel at the time of writing, up by 0.33%.
Important Statements from a Bank of Japan Member:
In his statements today, Seiji Adachi, a member of the Bank of Japan’s Board of Directors, expressed several points:
The Bank of Japan should avoid raising interest rates prematurely or making large moves in interest rates,
as these could disrupt household and corporate investments. The Japanese economy is experiencing a moderate recovery despite some weak signals,
with service consumption remaining steady in spending. Frequent changes in monetary policy to stabilize foreign
exchange movements can lead to significant changes in interest rates.
European stocks declined before releasing important data: European stock markets saw a downturn on Tuesday,
with losses in technology company stocks against a rise in consumer staple
goods stocks ahead of important economic data for the Eurozone later in the day.
A historic shift by the Bank of Japan leads to losses for the yen.
The Yen incurred significant losses on Tuesday following the Bank of Japan’s decision to end its negative interest rate policy,
a move that was highly anticipated.
This marks a historic step after years of the Bank of Japan adopting significant financial stimulus policies,
During a two-day monetary policy meeting, the bank ended the eight-year negative interest rate regime and other unconventional measures.
Following this news, the yen saw a 0.8% drop, exceeding 150 yen against the dollar.
The yen’s exchange rate at the end of trading was 150.39 yen against the dollar, also falling by more than 0.7% to 163.425 yen against the euro,
its lowest level in three weeks. Following Japan’s first interest rate hike in 17 years,
the Bank of Japan announced it would maintain “accommodative financial conditions” by setting overnight interest rates between zero and 0.1%.
European stocks experienced declines before releasing important data.
European stock markets saw a downturn on Tuesday, with losses in technology company stocks against
a rise in consumer staple goods stocks ahead of important economic data for the Eurozone later in the day.
Due to technological stock sell-offs, the European STOXX 600 index fell by 0.1% by 8:24 GMT.
Investors are monitoring wage data and labour costs for the last quarter of the Eurozone,
in addition to a survey conducted by the German Economic Research Institute on economic expectations for March.
However, investors’ main focus remains on the U.S. Federal Reserve regarding monetary policy,
which is set to be announced on Wednesday.
It is widely expected that the Federal Reserve will keep interest rates unchanged.
Attention will also be paid to the central bank’s economic outlook
and estimates for the number of interest rate cuts this year.
Gold prices retreat sharply in today’s trading
Gold prices are falling on Tuesday due to the dollar’s rising value as investors await the U.S. Federal Reserve meeting to discuss monetary policy,
which may provide further signals about the timing of interest rate cuts this year.
The dollar’s value increased by more than 0.2% to its highest level in about two weeks,
negatively affecting the cost of gold for holders of other currencies.
The Federal Reserve is generally expected to keep interest rates unchanged at the end of the meeting on Wednesday,
while markets await economic forecasts and interest rate developments by monetary policymakers.
Gold prices fell by 1% over the past week after data showed a strong rise
in U.S. consumer prices in February and a higher-than-expected increase in producer prices,
reducing expectations for an early interest rate cut by the Federal Reserve.
European stocks experienced declines before releasing important data
The Japanese yen fell after the Bank of Japan’s decision to keep the ultra-easy policy:
The yen fell as a result of the Bank of Japan’s decision to keep its tight monetary policy.
The Japanese Yen fell by 0.5%, while Asian stocks saw no change.
The bank’s decision to keep the interest rate at -0.1% came amid speculation
that the bank would cancel its tight monetary policy, and according to a Bloomberg poll,
experts believe that next April is the best time to make a change in the bank’s policy.
Both the dollar and the euro rose 1% against the yen,
and each is preparing to achieve the largest daily gain since the end of October,
with the US currency reaching 144.27 yen, and the common currency 157.68.
The Japanese Topix index (Tokyo Stock Price Index)showed that steel is the sector with the most losses.
Nippon Steel fell by more than 6% after it announced its purchase of United States Steel for $14.1 billion.
This deal would create the largest steel company in China the second largest in the world,
and the largest supplier to American automakers and manufacturers.
Chinese economy
As for the Chinese economy, it is still in the recovery phase.
Weak development continues to affect the economic recovery.
The value of Country Garden Services reached its lowest level after it declared some of its funds as losses.
As for China South City, which is partly owned by the southern city of Shenzhen,
it had previously warned of its inability to make the interest payment due on Wednesday,
which may affect its ability to repay loans.
It is also expected that the Chinese CSI 300 index will suffer an annual loss for the third year in a row,
and the index has declined by more than 13% this year.
Australian shares
As for the Australian market, Australian stocks rose,
while American contracts had a small rate of change,
while Wall Street continued to rise since Monday due to a large number of transactions,
and traders ignored all warnings from Federal Reserve officials regarding monetary easing. As for the Nasdaq 100 index,
it continued its rise, achieving record gains for the second session in a row.
American market
The S&P 500 index has maintained its rise for seven weeks,
and it cannot be determined whether the index will maintain its pace of rise for the eighth week.
While interest on two-year bonds rose by 4.5%, ten-year bond yields also reached 4%,
while Treasury bonds in Japanese transactions were stable while the dollar index fell.
Marko Kolanovic, a strategist at JP Morgan, expects a decline in inflation and economic demand data for 2024,
which will allow the Federal Reserve Bank to start cutting interest rates by 25 basis points at each meeting in the middle of the year.
Rate cuts in the United States
The President of the Federal Reserve Bank of Chicago, Austin Goolsbee,
the President of the Federal Reserve Bank of Cleveland, Loretta Mester,
joined the group of central bank presidents who wanted to reduce optimism in the market
regarding everything related to the issue of reducing the interest rate, and at the same time,
it was confirmed that talk about reducing Interest in March was premature.
Market news
Lithium giant SQM has purchased Azure Minerals for $1.1 billion in partnership with the richest Australian woman.
As for gold, it stabilized on Monday, while oil approached its highest price in two weeks
after many companies decided not to cross the Red Sea following the increase in Houthi attacks on ships in the main shipping channel.
The Japanese yen fell after the Bank of Japan’s decision to keep the ultra-easy policy
