As you must already know, the direction of Gold is mainly dependent on the Price action of DXY (US Dollar index). So first, we take a look at the US Dollar index.
US Interest Rate Slowdown?
2022-11-22 • Updated
The US Federal Reserve may refrain from more aggressive interest rate hikes in March due to geopolitical risks after Russia's special operation in Ukraine.
Fed officials, who would still like to begin the process of cutting easy monetary policies caused by COVID-19, say they are monitoring every impact of the conflict on the US economic activity. Since the pandemic started, the central bank has kept its interest rate near zero, so now high inflation in the US has implied that the Fed is likely to normalize it quicker. Earlier in August, St. Louis Fed President Jim Bullard declared that he would support a double rate hike (0.50%) for the next Fed meeting in mid-March. In fact, the Fed has not raised interest rates by more than 0.25% since 2000.
However, economists say the progressing situation in Ukraine brings plenty of doubts in a global recovery the same as the coronavirus issue. Disruptions in Russian oil and gas supplies are pushing up energy prices, and Ukraine's struggling economy is already impacting outcomes and growth across the continent.
In addition, the US Dollar Index can be impacted in any case, whether it’s a coronavirus issue or Ukrainian conflict. The US Dollar Index (USDX) is a measure of the US dollar value against a basket of currencies from most of the US's most important trading partners.
Since November 2021 this index has been fluctuating a lot, the lowest level was 94,540, the highest was 97,465. Most likely, it will continue to move up and down.
Now the resistance level is on 97.750, the support is on 96.500.
Some releases influence US Index and USD a lot, which can provoke unexpected fluctuations. There are several of them:
- Fed Chair Powell statement on March 2-3
- Unemployment rate and NFP releases on March 4
- Monthly CPI on March 10
- Monthly PPI on March 15
Still, the inflation rate in the US is 7.5%, which is the highest in 40 years. If the Fed slows down the interest rate rise, it can lead to consequences which are difficult to correct.
On January 12, the Bureau of Statistics will publish the Consumer Price Index (CPI) figures, a key index for determining interest rates. While we await the release, experts forecast a decline in the CPI data, a hint at weaker Dollar values in the global markets.
Later today Tiff Macklem, the governor of the BoC (Bank of Canada) is expected to speak at the Riksbank's International Symposium as part of a discussion panel on 'Central Bank Independence'.
Last year was tough for the Japanese yen. USDJPY gained more than 30% over 2022, striking above 150 in October. While anticipation of slower Fed rate hikes pulled the pair below the 130 level at the start of 2023, the speculations over the destiny of BOJ’s yield control policy grabbed the attention of the Japanese assets in the middle of January. What lies ahead for traders of the Japanese yen?
Today, at 5:00 pm (GMT +2), the Bank of Canada will publish the Overnight Rate, which represents short-term interest rates, and is pivotal to the overall pricing of the Canadian Dollar in the global markets. Let's look at how the markets are faring ahead of the BoC rates release.
In a call scheduled for January 25, 00:30 am GMT+2, Microsoft will publish the company's earnings for the final quarter of 2022 and comment on the results, projections, and outlook for the nearest future of the company.