Gold is on schedule for its best monthly performance since March last year, because the sentiment remains strong and the participants consider the possible influence of American politics. Both it and the dollar remained strong this week when the Federal Reserve (‘the FED’) kept rates and the European Central Bank (‘the ECB’) will leave as expected. This article summarizes Het Laatste Nieuws and the rumors that influence the most important markets this week, and then briefly looks at the charts of Xausd and Euuud.
The FED had the rates against the current 4.25-4.5% on January 29 as almost universally expected, and emphasized the importance of progress on inflation before more cuts. The chance of a new hold in March has now risen further to around 85% according to CME Fedwatch.
The labor market in the US generally remains strong and there is no indication of a coming recession based on GDP or other economic indicators. It is important that the FED statement had the reference to progress in the direction of the target for inflation of 2%. This could suggest that the FED sees current rising inflation as part of a relatively new trend in contrast to just a few months of remote results.
The ECB made a single reduction to its most important refinancing percentage, also expected very generally, so that it was brought to 2.9%. The next meeting on March 6 will probably also have a cut. The annual head inflation is half percent lower in the eurozone compared to the US and the ECB predicts a decrease of up to 2% towards the end of the year. This gives the central bank of the eurozone more room to lower the rates compared to the FED, but a considerable difference in rates between the euro and dollar can expose the first to more losses.
Donald Trump recently confirmed plans to introduce 25% rates for various Canadian and Mexican imports, while a rate of 10% is considered on Chinese goods. Markets expect important new rates on a large scale, so this is not a big surprise in itself, but details about how much they will cost rates and which products they will influence are the key. Traders are waiting for announcements of confirmed details.