CFD Markets Analysis: News and forecasts for 14 липня 2024

23:52

Gold Price Forecast: XAU/USD edges lower near $2,400 on US Dollar rebounds

Gold price extends the decline around $2,405 in Monday’s early Asian session.
The US PPI unexpectedly accelerated in June to its highest rate since March 2023.
Rising bets on Fed rate cuts might limit the precious metal’s downside.

Gold price (XAU/USD) trades in negative territory near $2,405 on Monday during the early Asian session. The hotter-than-expected Wholesale price inflation in the United States for June weighs on the precious metal. Traders await the Chinese Gross Domestic Product (GDP) for the second quarter (Q2), along with the US NY Empire State Manufacturing Index for July and the Federal Reserve's (Fed) Mary Daly speech, which is due later on Monday.

Data released by the Bureau of Labor Statistics on Friday showed that the US Producer Price Index (PPI) came in at 2.6% YoY in June from a revised up of 2.4% in the previous reading, beating expectations of 2.3%. On a monthly basis, the PPI rose 0.2% MoM in June, above the market consensus of 0.1%. Meanwhile, Producer Prices ex Food and Energy climbed more than expected on both a yearly and monthly basis.

Nonetheless, the downside of the yellow metal might be limited amid the expectation that the Fed would start its easing cycle sooner than expected in September. It’s worth noting that a lower interest rate generally increases the attractiveness of Gold, a non-interest-bearing investment. Financial markets are now pricing in nearly 80% odds for a 25 basis points (bps) cut in September, according to the CME Fedwatch Tool.

Furthermore, global political uncertainty and geopolitical tensions in the Middle East might boost the safe-haven flows, benefiting precious metals. On Saturday, former president Donald Trump was shot in the ear during his rally in Butler, Pennsylvania, in what the FBI said was an assassination attempt, per CNN.

Gold FAQs

Why do people invest in Gold?

Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.

Who buys the most Gold?

Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.

How is Gold correlated with other assets?

Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.

What does the price of Gold depend on?

The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.

23:02

United Kingdom Rightmove House Price Index (YoY): 0.4% (July) vs previous 0.6%

23:01

United Kingdom Rightmove House Price Index (MoM) down to -0.4% in July from previous 0%

22:59

AUD/USD attracts some sellers below 0.6800 ahead of Chinese data AUDUSD

AUD/USD weakens near 0.6770 in Monday’s early Asian session.
US PPI climbed more than expected in June on a margin pickup at service providers.
The RBA’s hawkish stance might support the Aussie in the near term.

The AUD/USD pair trades on a weaker note around 0.6770, snapping the four-day winning streak during the early Asian session on Monday. The recovery of the US Dollar (USD) provides some support to the pair. Later on Monday, the Chinese economic data and US NY Empire State Manufacturing Index for July are due and the Federal Reserve's (Fed) Mary Daly is set to speak.

The hotter-than-expected US Producer Price Index (PPI) figures on Friday had little to no impact on the USD. The PPI for final demand rose 0.2% MoM in June, according to Bureau of Labor Statistics data. On an annual basis, the PPI rose 2.6% YoY in June, compared to the previous reading of 2.4%. Additionally, the preliminary Michigan Consumer Sentiment Index came in below expectation at 66.0, compared to the forecast 68.5 and the previous 68.2.

The rising bets on the Federal Reserve's (Fed) rate cut in September after the release of softer US inflation figures might continue to limit the Greenback’s upside and create a tailwind for AUD/USD. According to the CME Fedwatch Tool, traders have priced in nearly 80% odds for a 25 basis points (bps) cut in September.

On the Aussie front, UBS FX strategists said, “Following the stronger-than-expected inflation data for May, we think a robust labor report and higher quarterly CPI for the second quarter will likely lead to a rate hike by the Reserve Bank of Australia (RBA) in August. This underpins our recommendation to sell the downside price risks of AUD/USD.”

Traders will take more cues from China’s Gross Domestic Product (GDP) for the second quarter, Industrial Production, and Retail Sales for June for fresh impetus. The weaker reading might drag the Aussie lower as China is one of Australia's closest trade partners,

Australian Dollar FAQs

What key factors drive the Australian Dollar?

One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD.

How do the decisions of the Reserve Bank of Australia impact the Australian Dollar?

The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.

How does the health of the Chinese Economy impact the Australian Dollar?

China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.

How does the price of Iron Ore impact the Australian Dollar?

Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.

How does the Trade Balance impact the Australian Dollar?

The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.

22:30

New Zealand Business NZ PSI down to 40.2 in June from previous 43

05:09

Trump safe after shots fired in assassination attempt at Pennsylvania rally

In a fateful incident during a rally in Butler, Pennsylvania on Saturday, Former President Donald Trump was injured in an assassination attempt.

Several bullet shots were fired at Donald Trump’s rally and one such shot ripped the upper part of his right ear.

Trump was immediately rushed to a safer place by the Secret Service and the shooter, who authorities identified only as a man from Pennsylvania about 20 years old, was killed by law enforcement.

Citing law enforcement sources, NBC News reported that one spectator was killed and two others are in critical condition.

US President Joe Biden condemned the shooting and said that 'there's no place in America for this kind of violence’.

Later, ex-US President Trump released a statement, saying he was ‘fine’ and undergoing a medical check-up.

"I knew immediately that something was wrong in that I heard a whizzing sound, shots, and immediately felt the bullet ripping through the skin. Much bleeding took place, so I realized then what was happening. GOD BLESS AMERICA,” he added.

Speaker Mike Johnson said that the House of Representatives “will conduct a full investigation of the tragic events” at the Trump rally.

Market implications

Financial markets could see a bit of risk aversion at the weekly open, putting a fresh bid under the US Dollar. Risk currencies such as the Australian Dollar and Pound Sterling could witness some pullback after the previous week’s solid performance while Gold price and the Japanese Yen could capitalize on early risk-off flows.

However, risk-off sentiment could weather out soon, as the focus shifts back to expectations surrounding the US Federal Reserve (Fed) interest-rate cuts and China’s economic prospects, with the second-quarter Gross Domestic Product (GDP) data for release early Monday.

Risk sentiment FAQs

What do the terms'risk-on' and 'risk-off' mean when referring to sentiment in financial markets?

In the world of financial jargon the two widely used terms “risk-on” and “risk off'' refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.

What are the key assets to track to understand risk sentiment dynamics?

Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.

Which currencies strengthen when sentiment is 'risk-on'?

The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.

Which currencies strengthen when sentiment is 'risk-off'?

The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.

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