USDollar fell sharply overnight and the broad-based decline extended into Asian session today. Some analysts attributed this selloff to Fed Chair Jerome Powell’s commentary during his Congressional testimony. Powell’s mention of needing “a little bit more data” before contemplating rate cuts has ignited a wave of speculation among investors and analysts alike, interpreting this statement as an implicit nod towards the possibility of a rate cut as soon as May. However, such expectations seem to be only minimally mirrored in Fed funds futures, which currently peg the likelihood of May cut at a modest 20%. Instead, Dollar’s weakness seems more intricately tied to the extended decline in treasury yields, coupled with sustained appetite for riskier assets across global markets.

The EUR/USD pair peaked a few pips below the 50% Fibonacci retracement of the 1.1139/1.0718 slide at 1.0917, so far holding above the 38.2% retracement of the same slide at 1.0865, the immediate support level. From a technical point of view, EUR/USD daily chart indicates it could ease further. Despite the broad US Dollar’s weakness, the pair pressures daily lows in the ECB’s aftermath, and technical indicators gain downward traction within positive levels. The same chart shows that the pair remains above all its moving averages, confined to a tight 30 pips range

Meanwhile, Japanese Yen embarked on a significant rally today, spurred by the latest wages growth data from Japan, which exceeded expectations and marked the highest increase since last June. This robust wage growth intensified speculation around rate hike by BoJ at this month’s meeting. Adding fuel to the fire, remarks from BoJ board member Junko Nakagawa have lent further credence to the prospect of imminent monetary tightening. The positive momentum for Yen is also supported by encouraging developments within Japan’s labor market.

SUPER IMPORTANT Main takeaways from Jerome Powell’s Q&A session in Senate
“If the economy does as expected, we think carefully removing the restrictive stance of policy will begin over the course of this year.”

“We are working hard to develop a new rule book for supervision, will involve earlier, more effective interventions.”

“Surge-pricing works both ways, in slow periods prices go down.”

“We need to give companies freedom to set prices.”

“The Fed is independent, and the way we do that is by staying out of political issues, like immigration policy.”

“When rates are normalized, underlying housing shortage will still put upward pressure on prices.”

“I believe we will have a consensus on capital proposal, we are in process of digesting comments, making appropriate changes.”

“We are not at the stage of making a decision on reproposing Basel 3.”

“Our job is to restore price stability, that’s what we are doing.”

Powell told the House Financial Services Committee on Wednesday that incoming data will determine when they will start reducing the policy rate and repeated that they would like to have greater confidence inflation will move sustainably toward 2% before taking action. Commenting on the economic outlook, Powell noted that there was no reason to think the economy was “in or facing a significant near-term risk of recession.”

The benchmark 10-year US Treasury bond yield declined to 4.1% in the American session on Wednesday and the US Dollar (USD) suffered large losses against its major rivals. According to the CME FedWatch Tool, markets are currently pricing in a nearly 90% probability of a rate cut in June. THUS buy and keep buying GOLD on any kind of dips

Gold price (XAU/USD) extends its winning streak for the seventh trading session on Thursday. The precious metal refreshes all-time highs at $2,164 amid multiple tailwinds. Firm expectations for a rate-cut decision by the Federal Reserve (Fed) in the June monetary policy meeting have strengthened the appeal for Gold. Improved safe-haven demand due to uncertain global financial conditions has also strengthened demand for Gold.

A sharp decline in US Treasury yields has reduced the opportunity cost of holding investments in non-yielding assets, such as Gold. 10-year US Treasury yields are slightly up by 0.2% at 4.11% in Thursday’s European session, but have dropped sharply from 4.22% in the last two trading sessions.

STRATEGY:
BUY GOLD 2145 exit 2170
SELL GOLD 2180 exit 2147
Have a lovely weekend

Prepared by: Mr. SAM KIMA, Senior Vice President