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MTrading Team • 2023-06-14

Gold consolidates recent losses ahead of Fed announcements

Gold consolidates recent losses ahead of Fed announcements

Anticipation of the Federal Reserve’s (Fed) no rate hike, after 10 consecutive lifts, challenge the market’s momentum on early Wednesday, especially after the US inflation matches downbeat forecasts. Even so, some of the former Fed representatives raise concerns about July's increase in rates and prod the optimists.

The same allows markets to pare the weekly moves wherein the US Dollar struggles for clear directions while yields retreat from multi-day highs. That said, Gold price snaps a three-day downward trajectory but fails to recover much while Brent extends the previous day’s gains amid hopes of more Oil demand.

AUDUSD becomes the biggest gainer among the G10 currency pairs whereas the GBPUSD and EURUSD lack momentum and stay mostly around the day-start levels. While doing the same, the Cable pair ignores mixed UK data and the Euro struggles to cheer hawkish ECB concerns. That said, USDJPY, USDCAD and USDCHF print mild losses whereas Asia-Pacific shares trade mixed.

On a different page, cryptocurrencies also lose momentum as pre-Fed caution joins mixed feelings from the SEC vs. Binance case.

Following are the latest moves of the key assets:

  • Brent oil rises 1.0% to print two-day uptrend as it regains the $75.00 at the latest.
  • Gold price prints the first daily gain in four, mildly bid near $1,950 as we write.
  • USD Index struggles for clear directions near 103.20 by the press time.
  • Wall Street closed on a positive side but the Asia-Pacific shares trade mixed. That said, the equities in the UK and Europe remain firmer as we write.
  • BTCUSD and ETHUSD remain sidelined near $25,900 and $1,740 respectively at the latest.
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Pre-Fed anxiety dominates

While the market’s inaction on the Fed day is normal, fears that the US central bank may choose to surprise everyone, especially following the BoC and RBA’s unexpected hawkish moves, keeps traders on their toes. It’s worth noting that US inflation eases in May but the core CPI figures match anticipate weakness while some of the policymakers have been hawkish in their last speeches. The same allows the trading fraternity to agree on no rate hike from the US central bank. However, the Fed isn’t known for being dovish, especially when it's mostly priced-in.

Elsewhere, Cable buyers take a breather despite upbeat UK GDP as other economics keep suggesting a slowing transition from a slowdown. Furthermore, looming challenges for the bond market and China’s inability to propel the market’s optimism also challenge the positive thinkers.

Hence, the optimists have a tough task keeping the reins moving forward, unless the Fed becomes a non-event, which is least likely.

  • Strong buy: USDCAD
  • Strong sell: ETHUSD, GBPUSD, Gold
  • Buy: USD Index, Nasdaq, USDJPY

FOMC is the key

Eurozone Industrial Production, US PPI and other second-tier data from the major economies may entertain the traders but major attention will be given to the Fed’s ability to tame inflation but not welcome the doves. In doing so, the FOMC may keep the rates unchanged but upwardly revise the economic projections and flag further rate hikes. The same emphasizes Fed Chair Powell’s press conference.

May the trading luck be with you!