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MTrading Team • 2024-03-07

Gold refreshes record high near $2,160 amid Fed rate cut concerns, softer US Dollar

Gold refreshes record high near $2,160 amid Fed rate cut concerns, softer US Dollar

Cautious optimism prevails in the market as traders make peace with the Federal Reserve’s (Fed) readiness to cut the benchmark rates in June. The same joins downbeat US employment clues and hopes of witnessing more stimulus from China, as well as the soft landings in major economies, to exert downside pressure on the US Dollar and Treasury bond yields.

The same keeps the US Dollar Index (DXY) heavy at the monthly low, down for the fifth consecutive day. With this, EURUSD edges higher past 1.0900 as Euro traders brace for the European Central Bank (ECB) monetary policy meeting while the GBPUSD cheers the upbeat UK budget at the monthly high.

Further, AUDUSD justifies the risk-barometer status whereas USDJPY prints a three-day losing streak while posting the lowest level in a month. Moving on, NZDUSD posts minor gains while the USDCAD remains indecisive after falling the most in 2024 the previous day. Additionally, Crude Oil struggles to defend the previous day’s rebound amid mixed updates about the supply-demand matrix.

It should be noted that the BTCUSD and ETHUSD remain sidelined around the multi-year highs marked recently amid optimism in the crypto markets. That said, ETHUSD rose to a fresh high since early 2022 whereas BTCUSD picks up bids to reverse the early week’s retreat from the record top.

Following are the latest moves of the key assets:

  • Brent oil fades the previous day’s recovery around $83.50 amid sluggish markets.
  • Gold price remains firmer around $2,158 by the press time, after refreshing the all-time high of $2,161.60 earlier in the day.
  • USD Index drops to the lowest level in five weeks, mildly offered near 103.25 at the latest.
  • Wall Street closed with minor gains but the Asia-Pacific stocks edged lower. Further, the shares in Europe and the UK print mild losses amid the initial hour.
  • BTCUSD print mild gains around $66,370 while ETHUSD retreats from multi-year high to $3,800 as we write.
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Gold renews ATH, USDJPY slumps as US Dollar fails to cheer hawkish Fed signals…

Even if Fed Chair Powell pushes back imminent rate cut concerns and advocates for the US soft landing, the US Dollar fails to recover. The reason could be linked to the market’s peace with the June rate cut concerns, as well as the US Treasury bond yields’ inability to recover.

Amid these plays, the US Dollar Index (DXY) drop to the lowest level in a month during the five-day losing streak. The same allows major currencies to report gains while commodities and Antipodeans also grind higher as equities struggle to defend the previous upside moves.

It’s worth noting, however, that the Gold price rose to the highest level on record despite posting mild gains of around $2,160. Among other catalysts, the downbeat performance of the US Dollar and Treasury bond yields propel the XAUUSD prices amid the market’s cautious optimism.

USDJPY drops the most among the major currency pairs as the softer US Dollar joins hawkish concerns about the Bank of Japan (BoJ). The chatters about the BoJ’s exit from ultra-easy monetary policy gained momentum on comments from Governor Kazuo Ueda and policymaker Junko Nakagawa. That said, both policymakers praised the progress in managing the inflation conditions and teased a gradual shift in the policies in the upcoming time.

Elsewhere, downbeat German Industrial Production contrasted with the firmer Eurozone Retail Sales growth to test the EURUSD bulls at the monthly high, especially amid a cautious mood ahead of today’s ECB Interest Rates Decision.

Furthermore, GBPUSD benefits from the UK’s Spring Budget which suggests further tax benefits for the British population to defend the economic recovery. Additionally, Crude Oil recovered on lower-than-expected US oil inventory build and the softer US Dollar. However, fears of increasing supplies test the energy bulls of late.

  • Strong buy: USDCAD, USDJPY
  • Strong sell: Crude Oil, US Dollar, GBPUSD
  • Buy: BTCUSD, ETHUSD, Nasdaq, Gold

ECB, Fed Chair Powell’s Testimony and US data eyed…

Looking ahead, the ECB’s monetary policy announcements will gain major attention even if the bloc’s central bank isn’t expected to alter the current monetary policy. The reason could be linked to the likely clues of witnessing a delayed rate cut and/or hints of soft landing the old continent, which if provided will bolster the Euro and exert additional downside pressure on the US Dollar.

Elsewhere, Powell’s second Testimony, weekly US Jobless Claims and monthly prints of the US Trade numbers will offer more volatility and can allow the US Dollar to pare recent losses on positive outcomes.

Apart from the aforementioned data/events, US President Joe Biden is also scheduled to deliver a speech that will cover inflation conditions of the world’s largest economy. The same could help the US Dollar to pare some of the latest losses should Biden join hawkish Powell and the scheduled data flash positive signs.

May the trading luck be with you!