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CFD Markets News and Forecasts — 28-01-2024
- Gold price gains ground near $2,025 amid the ongoing tension in the Middle East.
- The US Core PCE gauge registered its lowest level since March 2021, coming in at 2.9% YoY in December vs. 3.2% prior.
- The rising tension in the Middle East might boost the price of gold, a traditional safe-haven asset.
- Traders will closely monitor the Federal Open Market Committee (FOMC) meeting on Wednesday.
Gold price snaps the two-week losing streak during the early Asian session on Monday. The escalating tension in the Middle East boosts the safe-haven demand, which lifts the yellow metal. The spotlight this week will be the Federal Open Market Committee (FOMC) meeting on Wednesday, which is expected to keep rates at 5.25–5.50%. At press time, the gold price is trading at $2,025, gaining 0.33% on the day.
The Personal Consumption Expenditures Price Index (PCE) came in at 0.2% MoM and 2.6% YoY in December, according to Commerce Department data released Friday. The core PCE figure, excluding energy and food, rose 2.9% annually, a slower pace than the 3.2% rate seen in November. The core PCE gauge registered its lowest level since March 2021.
The markets anticipate the Federal Reserve (Fed) to keep rates steady at 5.25–5.50% at its January meeting on Wednesday. Traders will take more cues from the press conference. If Fed Chairman Jerome Powell signals a possible rate cut in March, this could exert some selling pressure on the Greenback.
Three US troops were killed and dozens injured after an unmanned aerial drone attack on US forces stationed in northeastern Jordan near the Syrian border, US officials said on Sunday. The rising tension in the Middle East might boost a safe-haven asset like gold.
Looking ahead, the FOMC meeting on Wednesday will be the highlight of this week ahead of the Bank of England (BoE) interest rate decision on Thursday. These events could give a clear direction to the gold price.
New Zealand’s Trade Balance came in at $-13.57B YoY in December versus $-13.90B prior, according to the latest data released by Statistics New Zealand on Monday.
Further details suggest that Exports declined to $5.94B during the said month versus $5.99B prior whereas Imports dropped to $6.26B compared to $7.20B in previous readings.
Market reaction
At the press time, the NZD/USD pair is down 0.03% on the day to trade at 0.6089.
About New Zealand Trade Balance
Trade balance, released by Statistics New Zealand, is the difference between the value of country's exports and imports, over a period of year. A positive balance means that exports exceed imports, a negative ones means the opposite. Positive trade balance illustrates high competitiveness of country's economy.
New Zealand Dollar FAQs
What key factors drive the New Zealand Dollar?
The New Zealand Dollar (NZD), also known as the Kiwi, is a well-known traded currency among investors. Its value is broadly determined by the health of the New Zealand economy and the country’s central bank policy. Still, there are some unique particularities that also can make NZD move. The performance of the Chinese economy tends to move the Kiwi because China is New Zealand’s biggest trading partner. Bad news for the Chinese economy likely means less New Zealand exports to the country, hitting the economy and thus its currency. Another factor moving NZD is dairy prices as the dairy industry is New Zealand’s main export. High dairy prices boost export income, contributing positively to the economy and thus to the NZD.
How do decisions of the RBNZ impact the New Zealand Dollar?
The Reserve Bank of New Zealand (RBNZ) aims to achieve and maintain an inflation rate between 1% and 3% over the medium term, with a focus to keep it near the 2% mid-point. To this end, the bank sets an appropriate level of interest rates. When inflation is too high, the RBNZ will increase interest rates to cool the economy, but the move will also make bond yields higher, increasing investors’ appeal to invest in the country and thus boosting NZD. On the contrary, lower interest rates tend to weaken NZD. The so-called rate differential, or how rates in New Zealand are or are expected to be compared to the ones set by the US Federal Reserve, can also play a key role in moving the NZD/USD pair.
How does economic data influence the value of the New Zealand Dollar?
Macroeconomic data releases in New Zealand are key to assess the state of the economy and can impact the New Zealand Dollar’s (NZD) valuation. A strong economy, based on high economic growth, low unemployment and high confidence is good for NZD. High economic growth attracts foreign investment and may encourage the Reserve Bank of New Zealand to increase interest rates, if this economic strength comes together with elevated inflation. Conversely, if economic data is weak, NZD is likely to depreciate.
How does broader risk sentiment impact the New Zealand Dollar?
The New Zealand Dollar (NZD) tends to strengthen during risk-on periods, or when investors perceive that broader market risks are low and are optimistic about growth. This tends to lead to a more favorable outlook for commodities and so-called ‘commodity currencies’ such as the Kiwi. Conversely, NZD tends to weaken at times of market turbulence or economic uncertainty as investors tend to sell higher-risk assets and flee to the more-stable safe havens.
- AUD/USD trades on a soft note near 0.6573 amid the stronger USD.
- The US Core PCE for December rose 0.2% on the month and was up 2.9% on a yearly basis.
- A stimulus measure from Chinese authorities last week helped boost the Aussie.
- The Australian CPI data and the FOMC meeting will be in the spotlight this week
The AUD/USD pair remains capped under the 0.6600 mark during the early Asian session on Monday. The firmer US Dollar (USD) and higher US Treasury bond yields weigh on the AUD/USD pair. Investors await the Australian Consumer Price Index (CPI) data and the Federal Open Market Committee (FOMC) meeting this week for fresh impetus. The pair currently trades around 0.6573, down 0.11% on the day.
Data from the Commerce Department reported on Friday that the US Core Personal Consumption Expenditures Price Index (PCE) for December, an important gauge for the Federal Reserve, rose 0.2% on the month from 0.1% in the previous reading and increased 2.9% on a yearly basis from the previous reading of 3.2%. The headline PCE, including volatile food and energy costs, grew 0.2% for the month and held steady at 2.6% annually. Additionally, US pending home sales came in at 8.3% MoM in December versus -0.3% prior, above the market consensus of 1.5%.
Now that inflation is cooling, investors anticipate the Federal Reserve (Fed) to begin easing the policy. According to the CME FedWatch Tool, futures traders have priced in a 53% likelihood that the Fed would cut interest rates for the first time this cycle in the March meeting.
On the Aussie front, stimulus measures from Chinese authorities helped boost the China-proxy Australian Dollar (AUD) last week. Beijing unveiled a plan for improving liquidity in the banking system, while the People's Bank of China (PBoC) reduced China's reserve ratio requirement by 0.5 percentage points. There are also increasing expectations that Chinese officials might look into a package of steps to stabilize the country's falling stock market.
Traders will keep an eye on the December Australian Retail Sales on Tuesday. The monthly Australian CPI inflation data will be due on Wednesday, which is estimated to ease to 3.7% YoY in December from 4.3% in the previous reading. Later on Wednesday, the FOMC will announce the interest rate decision, with no change in monetary policy expected.
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