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Trends & Analysis
News

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News

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News

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News

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US big banks report better-than-expected earnings

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Gold loses some shine ahead of Fed’s rate decision

 

Wednesday, March 20, 2024

Today’s headlines

What’s happening: Gold prices moved lower on Tuesday, amid some strength in the US dollar.

What happened: Investors remained broadly on the sidelines on Tuesday, as they awaited the US Federal Reserve’s interest rate decision.

Meanwhile, Japan ended its negative interest rate policy, as the Bank of Japan (BoJ) raised interest rates for the first time since 2007. The Reserve Bank of Australia kept its benchmark rate unchanged as was widely expected.

Why it matters: Gold had surged to a record high of $2,194.99 per ounce on March 8. The yellow metal reversed this uptrend and tumbled around 1% last week, after the release of hotter-than-expected CPI and PPI data from the US, which fuelled speculations of the Federal Reserve keeping interest rates higher for longer.

The annual inflation rate in the US accelerated to 3.2% in February, from 3.1% in January, and came in higher than market expectations of 3.1%. The core producer price index rose by 2% year-over-year in February, higher than estimates of a 1.9% increase.

A higher inflation rate forces the US central bank to hold interest rates at elevated levels, negatively impacting the non-yielding gold.

The Fed started its two-day policy meeting on Tuesday and is all set to announce its interest rate decision today. Meanwhile, the Bank of Japan increased its key short-term interest rate from -0.1% to 0% to 0.1%, matching market estimates.

The US dollar hit a more than two week high on Tuesday, which made the bullion more expensive for foreign buyers. The US dollar index, which measures the greenback’s performance versus a basket of major peers, gained around 0.4% on Tuesday.

Gold for April delivery fell around $4.60, or 0.2%, to settle at $2,159.70 per ounce.

In other metals trading, silver for May delivery declined 13 cents to close at $25.14 per ounce, May copper slipped 6 cents to $4.07 per pound, platinum tumbled to $901.1, while palladium dipped around 4% to settle at $999.40.

What to watch: Investors await the Fed’s interest rate decision today. The US central bank is widely expected to keep rate unchanged. Investors will also monitor remarks from Fed chief Jerome Powell to get some insights into future rate cuts.

The Bank of England, which will announce its policy decision on Thursday, is widely expected to hold rates.

The markets today

UK stocks will be in focus today ahead of a basket of major economic reports

Context: London’s FTSE 100 index settled higher on Tuesday, driven by gains in Unilever’s shares.

Details: Investors remained cautious ahead of key inflation data from the UK and the US Federal Reserve’s interest rate decision. The Bank of England’s rate decision is also scheduled for Thursday.

UK’s FTSE 100 index has underperformed its US and European peers year-to-date, amid uncertainty around interest rate cuts by the major respective central banks.

Shares of Unilever gained more than 3% on Tuesday, as the group announced plans to spin off its ice cream division and slash 7,500 jobs. The gains in Unilever’s stock resulted in a 0.9% surge in the personal care sector index.

However, Crest Nicholson’s stock fell more than 4% after the company said it will build up to 11% fewer homes in fiscal 2024. The pressure on the housebuilder’s stock sent the homebuilding index down by around 1.4% on Tuesday. AstraZeneca’s shares also edged lower after the company announced plans to acquire Fusion Pharma for $2 billion in cash.

The blue-chip FTSE 100 gained 0.2% to close at 7,738.30, while the FTSE 250 index declined 0.28% to settle at 19,432.81 on Tuesday. Meanwhile, the GBP/USD forex pair slipped around 0.05% to 1.2723.

What to watch: Investors await the release of economic reports on inflation rate, producer price inflation and retail price index from the UK today. Inflation in the UK, which eased to 4% in January, is expected to slow further to 3.5% in February.

Factory gate prices of goods produced by UK manufacturers, which declined by 0.2% in January, are expected to increase by 0.1% in February. Analysts expect UK’s Retail Price Index to decelerate to 4.5% year-over-year in February, from 4.9% in the previous month.

Other Markets: US trading indices closed higher on Tuesday, with the Dow Jones index, S&P 500 and Nasdaq 100 up by 0.83%, 0.56% and 0.26%, respectively.

The news shaping the markets

Russian President Vladimir Putin has plans to travel to China in May for talks with President Xi Jinping. The news sent the RUB/USD pair lower in forex trading this morning.


The People’s Bank of China maintained lending rates at the March fixing. Although this was widely expected, it lent support to the CNY/USD forex pair.


New Zealand’s current account deficit shrank to NZ$7.837 billion in the fourth quarter, from NZ$9.8 billion in the year-ago period, sending the NZD/USD pair higher in forex trading this morning.


Argentina recorded a trade surplus of $1,438 million in February. This came in sharply higher than the $211 million surplus posted in the year-ago period, lending support to the ARS/USD forex pair.


The American Petroleum Institute said that US crude oil stockpiles fell by 1.519 million barrels in the week ending March 15. The contraction being significantly below the decline of 5.521 million barrels recorded in the previous week sent the WTI crude oil prices lower this morning.

What else to watch today

Germany’s producer prices, Turkey’s consumer confidence index and government debt, Indonesia’s loan growth and Bank of Indonesia’s interest rate decision, South Africa’s consumer price index and retail sales, Italy’s industrial production, Eurozone’s construction output and consumer confidence indicator, US MBA mortgage applications, crude oil inventories, gasoline stocks change and distillate inventories, India’s money supply M3, Russia’s producer price inflation, Spain’s consumer confidence indicator, as well as Argentina’s unemployment rate and gross domestic product.


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