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Trends & Analysis
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Gold hits multi-week high amid a USD decline
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News
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European Markets Gain Despite Rising COVID Cases

The news shaping the markets today

New Zealand’s building permits increased 0.6% to 4,206 in November, following a 2.1% decline a month ago, lending support to the NZD/USD forex pair.


The US budget deficit shrank to $21.3 billion in December, from a $143.5 billion gap in the year-ago period. This being the smallest deficit since December 2019 provided support to Wall Street stocks on Wednesday.


India’s retail price inflation accelerated to 5.59% in December, from 4.91% in the earlier month. However, this was better than the consensus estimate of 5.80% and sent the INR/USD pair to a three-month high on Wednesday.


Russia’s annual consumer price inflation eased slightly to 8.39% in December, from 8.40% in the previous month. The RUB/USD forex pair remained flat after the news.


US crude oil inventories contracted by 4.553 million barrels in the week ending January 7, versus market expectations of a decline of 1.904 million barrels. However, WTI crude prices came under pressure earlier this morning.

 

What’s happening: European stocks recorded gains on Wednesday, following comments from Fed Chairman Jerome Powell.

What happened: Majority of the sectors in Europe traded in the positive zone on Wednesday as markets digested US inflation report.

Investors continued assessing the spread of the Omicron variant, with one of the major European countries reporting a record single day rise in infections on Tuesday.

Why it matters: The US Federal Reserve Chief seemed less hawkish than expected during his testimony. Jerome Powell said that the US economy could handle a tighter monetary policy despite facing a surge in covid-19 cases.

The US also released data on consumer prices for December, which showed the highest annual inflation rate in around four decades.

The pan-European STOXX 600 index gained 0.65% to settle at 486.20 on Wednesday, with shares of basic resources surging on lower-than-estimated inflation data from China. Technology stocks also recorded gains for the second consecutive session.

The gains came a day after the STOXX 600 recorded its best session in around three weeks on a rebound in tech stocks.

Meanwhile, the new Omicron variant continued to spread, with Germany reporting a record number of daily infections on Tuesday. The German DAX 40 gained 0.43% to close at 16,010.32 on Wednesday.

Although the WHO warned that over half the European population will likely contract the new strain over the next two months, the symptoms are expected to be mild.

On the economic data front, Eurozone’s industrial production grew 2.3% in November, easily topping market expectations of 0.5% growth. Germany’s wholesale price inflation eased to 16.1% in December, from 16.6% in November.

The FTSE 100 gained 0.81% to close at 7,551.72 on Wednesday, hitting its strongest level since February 2020. The CAC 40 also extended gains, closing higher by 0.75% at 7,237.19.

What to watch: Traders will keep an eye on the earnings season for the fourth quarter and expect the positive momentum to continue. Profit for the STOXX 600 firms is projected to grow 48.5% year-over-year to €108.7 billion in the fourth quarter.

The markets today

Gold will be in focus today after recording gains on Wednesday.

 

Context: Gold prices moved higher on Wednesday, following a decline in the greenback on a disappointing inflation report from the US.

Details: The annual inflation rate in the US accelerated to 7% in December, reaching a new high since June 1982 and significantly higher than the Federal Reserve’s target of 2%. The report support gold prices due to the yellow metal’s appeal as an inflation hedge.

The US dollar declined after the inflation report. The US dollar index, which measures the currency’s performance versus a basket of six major peers, fell to a two-month low. Weakness in the greenback supports gold prices, as it makes the yellow metal more attractive for foreign buyers.

However, the overall gains for gold were limited by elevated investor risk appetite, which sent US stocks higher.

Gold for February delivery gained $8.80 to settle at $1,827.30 an ounce, while silver for March delivery added 40 cents to $23.21 an ounce on Wednesday. March copper gained 15 cents to $4.58 a pound. Platinum rose to $980.1, while palladium settled slightly lower at $1,915.80.

What to watch: Traders await the release of producer price inflation data from the US. Producer prices for final demand rose 0.8% in November and is expected to rise 0.4% in December.

Other Markets: US indices closed higher on Wednesday, with the Dow Jones index, S&P 500 and Nasdaq 100 up by 0.11%, 0.28% and 0.38%, respectively.

Support & resistances for today

Technical Levels News Sentiment
DAX 40 – 15,973.36 and 16,028.21 Positive
CAC 40 – 7,225.59 and 7,245.93 Positive
Gold – 1,824.21 and 1,825.41 Negative
Silver – 23.196 and 23.227 Positive
Copper – 4.5306 and 4.5499 Negative

 

Market snapshot

What else to watch today

Turkey’s industrial production, foreign exchange reserves and retail sales, Italy’s industrial production, US initial jobless claims, continuing jobless claims and natural gas stocks change, Brazil’s industry confidence indicator, as well as Argentina’s inflation rate.


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