GOLD Analysis:
XAUUSD Gold price is moving in an Ascending channel and the market has reached the higher high area of the channel
The surge in gold prices follows remarks from the Federal Reserve suggesting the possibility of rate cuts in 2024, with US inflation reaching target levels. Additionally, China’s injection of 80 billion Yuan into the economy this week has propelled commodity prices upward.
The upcoming release of the minutes from the November 1st FOMC meeting tonight will provide further insights into the Federal Reserve’s outlook for the coming months. Despite the market’s consensus that interest rates have peaked and are poised for cuts in the next year, Chair Powell remains cautious about declaring victory over inflation.
Powell maintains that the central bank is prepared to raise rates further if necessary, contrasting with the market’s expectation of a 100 basis point cut in US interest rates by the end of next year, with the initial 25 basis point reduction anticipated at the May 2024 meeting. As the market solidifies its belief that rates will not climb higher, the US dollar has experienced a decline, shedding four points since the start of November and breeching several layers of support. Failure to reclaim the 200-day simple moving average by the DXY may lead to further losses.
After a three-week selloff amid a risk-on market shift, the precious metal is now responding favorably to developments in the US interest rate space. Overall, financial markets are expected to quieten down after Wednesday as the US observes Thanksgiving Day on Thursday, followed by the annual Black Friday event. This reduction in liquidity is likely to dampen volatility heading into the weekend.
SILVER Analysis:
XAGUSD Silver price is moving in an Ascending channel and the market has rebounded from the higher low area of the channel
The minutes from the Federal Reserve’s Powell indicate a dovish stance, exerting a downward pressure on the US Dollar. The rate hikes implemented thus far have proven effective in curbing inflation in recent months. The meeting minutes from FED Powell have contributed to the adverse impact on the US Dollar.
The minutes of the November FOMC meeting were recently released by the US Federal Reserve, and the market response was relatively subdued, with no significant surprises. This reaction aligns with the data and market participants’ responses since then, especially considering the recent US inflation figures, which triggered a widespread sell-off in the US Dollar.
While the outlook may have evolved for Fed members post-meeting, some key takeaways include the unchanged September staff projections. The Fed continues to emphasize its commitment to data-driven decision-making, and participants highlighted that further policy tightening would be deemed appropriate if progress toward the inflation goal proved insufficient. Despite the recent boost from the CPI print, Fed policymakers acknowledge that there is still work to be done, as they have emphasized in recent statements.
Fed policymakers express dissatisfaction with the limited progress in reducing core services, excluding housing inflation. They stress the need for a more sustained downward push on the inflation front to ease concerns. According to the FedWatch tool, rate expectations saw little change after the release of the Fed minutes, with the first rate cut likely anticipated in May 2024 and fully priced in for June 2024. The upcoming high-impact data from the US for the week, including Durable Goods Orders and the Final Michigan Sentiment print, is expected tomorrow. However, neither of these releases is anticipated to be particularly exciting and may have minimal or short-term impact on the US Dollar.
USDCAD Analysis:
USDCAD is moving in an Ascending channel and the market has reached the higher low area of the channel
In October, the Canadian Consumer Price Index (CPI) recorded a rate of 3.1%, slightly below the anticipated 3.2% and a decrease from the previous month’s 3.8%. Following this announcement, the Canadian Dollar experienced a decline. Analysts now suggest that the Bank of Canada may not need to raise interest rates in upcoming meetings to address inflation, based on their assessment.
The Bank of Canada received a positive development today as Canadian inflation, mirroring its US counterpart, declined more than anticipated. This holds significance for the Bank of Canada, as inflation, which had been gradually increasing since the June low of 2.8%, reached a peak of 4% in August. Such fluctuations are not uncommon, especially in the current risk environment, when returning to the targeted rate is rarely a smooth process for Central Banks.In October 2023, the annual inflation rate in Canada dropped to 3.1% from the previous month’s 3.8%, slightly below the market’s expected 3.2%. This outcome was softer than the Bank of Canada’s projection, which foresaw inflation remaining close to 3.5% until the middle of next year. This has strengthened market beliefs that another rate hike from the central bank is unlikely.
GBPCAD Analysis:
GBPCAD is moving in an Ascending channel and the market has fallen from the higher high area of the channel
The current interest rate environment is already affecting Canadian consumers, and an additional hike could have intensified the challenges they face. The decrease in gas prices played a significant role in the overall decline, and a reduction in food price inflation is also a positive development. However, from a consumer standpoint, the current 5.6% food price inflation remains uncomfortably high, and rising bond yields are keeping mortgage costs elevated. This less-than-optimistic outlook for the Canadian economy may continue to exert pressure on the loonie in the foreseeable future. Despite the US Federal Reserve Minutes having little impact on markets earlier, recent data suggests that the Fed is making significant efforts to bring inflation back to its target.
GBPUSD Analysis:
GBPUSD is moving in an Ascending channel and the market has reached the higher high area of the channel
Governor Bailey of the Bank of England remarked that inflation has shown signs of cooling in the latest month’s data, but he emphasized that it is premature to declare victory. The necessity for rate hikes remains in order to address inflation in the UK. Although the debt to GDP ratio surpassed 100%, leading to a credit downgrade outlook for the UK, the situation quickly rebounded following positive inflation readings.
The strength of the British pound is being sustained by a weakened US dollar and the assertive stance of Bank of England Governor Andrew Bailey, who has made crucial remarks regarding inflation and the future of monetary policy. Bailey expressed concerns about inflation risks and hinted at the possibility of more aggressive action. While the recently released October inflation data brought positive news, Bailey remains cautious, emphasizing the need to monitor signs of persistent inflation. Geopolitical events in the Middle East contribute to potential upward risks in energy prices.
Despite the positive inflation figures, it is premature to consider rate cuts. Earlier today, UK public sector borrowing data exceeded estimates significantly, although the figure remains deeply negative and is the lowest since June 2023. The debt-to-GDP ratio remains above 100% due to government stimulus measures during the COVID-19 pandemic. The sustained high levels of inflation and interest rates have worsened the deficit, especially as a significant portion of the UK’s debt is inflation-linked. Elevated debt levels pose challenges for absorbing additional economic shocks and expose the nation to credit downgrades.
Later today, attention will shift to the FOMC minutes from the November rate announcement. The Fed has resisted expectations for rate cuts, maintaining a ‘higher for longer’ narrative, but also acknowledging the impact of elevated rates on the US economy. While the minutes are anticipated to echo similar sentiments, recent data indicating a slowing economy and a weakening job market suggests that any dovish messaging could be seized upon by USD bears.
GBPNZD Analysis:
GBPNZD has broken the Descending channel in upside
The New Zealand Dollar experienced an increase against the US Dollar this week, propelled by China’s supportive measures for its economy. This, in turn, provided a boost to New Zealand’s export businesses and commodity prices.
The New Zealand Dollar experienced an early rally on Tuesday, but this momentum waned as the US Dollar strengthened following the release of the Federal Open Market Committee Minutes from its early November meeting. The FOMC Minutes indicated the central bank’s readiness for further tightening if deemed necessary. Optimism about the Chinese economy, fueled by pledges of support from Chinese central bank officials on Monday, has contributed to the positive outlook for New Zealand, a significant trading partner.
As optimism grows regarding China, New Zealand’s largest trading neighbor, the New Zealand Dollar sees upward movement. This reflects the anticipation of robust demand for Kiwi goods, leading to increased demand for the currency and bolstering its strength. On Monday, the People’s Bank of China reiterated its commitment to providing additional policy support for the struggling real estate sector. The decision to maintain the benchmark Loan Prime Rate at record lows of 3.45% further supports the availability of easy credit.
EURUSD Analysis:
EURUSD is moving in an Ascending channel and the market has fallen from the higher high area of the channel
In her speech in Berlin, ECB President Lagarde noted that inflation has moderated more than anticipated, cautioning against premature declarations of victory on the inflation front. Following President Lagarde’s hawkish remarks, the Euro currency appreciated against its counterparts.
The EURUSD pair received a measure of support following the hawkish remarks made overnight by Christine Lagarde, the President of the European Central Bank. Speaking at an event in Berlin, Lagarde mentioned that it is premature to declare victory over inflation, cautioning against bets based on short-term data flow.
EURJPY Analysis:
EURJPY is moving in an Ascending channel and the market has rebounded from the higher low area of the channel
The Japanese Consumer Price Index (CPI) report is set for release tomorrow, and if the numbers show an increase, it could prompt the Bank of Japan to consider raising rates in 2024. Governor Ueda of the Bank of Japan has emphasized that sustainable cooling of wages and inflation is a prerequisite for any potential interest rate hike in Japan.
Prime Minister Kishida of Japan stated that the Bank of Japan does not target foreign exchange rates. We anticipate that the BoJ is open to engaging in discussions with us regarding the details of monetary policy and determining the appropriate policy settings.
The yen has faced challenges in sustaining a consistent period of strength, even after the Bank of Japan removed previous obstacles to increasing bond yields, a move that typically leads to currency appreciation. In addition to the initial lack of momentum, BoJ Governor Ueda did not specify when the central bank might shift away from its ultra-loose policy. However, he extensively discussed the possibility of stepping back from negative interest rates if incoming data on inflation and wage growth make a compelling case for such a move.
In an address to members of Parliament, Japan’s Prime Minister Fumio Kishida stated that the monetary policy of the Bank of Japan is not designed to influence foreign exchange rates in a specific direction. Kishida further noted that his government anticipates the BOJ to implement appropriate monetary policies and to communicate its perspectives with the government.
EURCHF Analysis:
EURCHF is moving in the Descending channel and the market has reached the lower high area of the channel
In October, the Swiss Franc trade balance was 4600 million, a decrease from the previous month’s 6281 million. Imports decreased to 18491 million, and exports declined to 23091 million from 24788 million last month. Following the publication of this data, the Swiss Franc experienced appreciation.
The Swiss Trade Balance for October registered at 4,600M, down from 6,282M in the preceding month. Imports decreased to 18,491M compared to September, and exports saw a decline to 23,091M from the 24,788M recorded earlier. Swiss National Bank Chairman Thomas Jordan’s remarks hinting at the possibility of future rate hikes have bolstered the Swiss Franc against the USD. Today, market focus will be on US weekly Jobless Claims, Durable Goods Orders, and the University of Michigan Consumer Sentiment survey. The upcoming US S&P Global PMI data on Friday is anticipated to provide a clearer direction.
AUDCAD Analysis:
AUDCAD is moving in an Ascending channel and the market has fallen from the higher high area of the channel
The RBA meeting minutes this week conveyed a hawkish outlook from the RBA Governor, leading to a rise in the Australian Dollar against its counterparts. China’s economy is experiencing positive momentum, supported by the Chinese government’s infusion of 80 billion Yuan into infrastructure and the real estate sector.
The minutes from the November 7th RBA meeting unveiled a close consideration of a 25 basis points rate hike, aimed at anchoring inflation expectations. Notably, the committee’s recent forecasts incorporated the assumption of additional rate increases. The decision was somewhat facilitated by the comparatively low Australian Cash Rate in comparison to other major central banks. Although Australian interest rates are somewhat restrictive, the housing market displayed resilience, indicating that demand could still pose potential challenges in the sector, potentially influencing future price increases. In a panel discussion earlier today, RBA Governor Michele Bullock emphasized the evolving nature of the inflation profile, initially rooted in supply-side issues but more recently demonstrating an increasingly significant role played by demand.
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