Gold markets government bond yields pressure multi-week highs, with the 10-year Treasury note currently hovering around 4.31% after an early peak of 4.35%. Yields surged on Wednesday following the release of the Federal Open Market Committee (FOMC) meeting Minutes. The document confirmed officials are in no rush to cut rates, as they would prefer to see more evidence of inflation progress before trimming rates. Policymakers highlighted the risks of “moving too quickly,” although acknowledging the policy rate is likely at its peak for this tightening cycle.

In the currency markets, Japanese Yen emerges as the most significant underperformer, embodying the broad risk-on sentiment that typically sees investors moving away from safe-haven assets. Swiss Franc also finds itself on the weaker side, echoing a similar sentiment. However, development in other currencies are less clear.

While Dollar experienced some pressure earlier in the day, it’s is attempting a rebound in early US session, buoyed by rally in Treasury yields. Euro found support from improvement in PMI data, particularly with France showing robust performance that helped counterbalance weak Germany’s. Accounts from the European Central Bank (ECB) meeting revealed policymakers’ apprehensions regarding premature policy easing. However, this has not translated into sustained momentum for the common currency.

Accounts of ECB’s January 24-25 meeting showed that reveal a cautious stance among its members towards the idea of interest rate cuts. Officials reached a “broad consensus” on the notion that discussing rate cuts at this juncture was “premature” with many members emphasizing “risk management considerations” as a foundation for this perspective. The “risk of cutting policy rates too early was still seen as outweighing that of cutting rates too late”, the minuted noted

UK’s PMI Manufacturing edged up from 47.0 to 47.1, aligning with expectations, while PMI Services was steady at 54.3, just shy of the anticipated 54.4. PMI Composite index rose from 52.9 to 53.3, underscoring a period of accelerated economic growth and marking the highest reading in nine months.

Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, emphasized the significance, noting that recent uptick is part of a consistent pattern of improvement over the “four straight months”. Williamson’s analysis suggests that the economy is expanding at a quarterly rate of 0.2-0.3% in Q1 2024, signaling that UK’s recessionary phase may have concluded.

Japan’s PMI Manufacturing dipped further to 47.2 from 48.0, marking the ninth consecutive month of sector contraction and hitting the lowest point since August 2020. PMI Services also declined, albeit more moderate, falling from 53.1 to 52.5. Consequently, Composite PMI, which combines both manufacturing and service sectors, decreased from 51.5 to a near-stagnation point of 50.3.

STRATEGY:

BUY GOLD 2017 Exit 2027

SELL GOLD 2030 exit 2014

BUY GBPUSD 12570 exit 12680

SELL GBPUSD 12682 exit 12580

BUY USDJPY 14940 exit 15080

SELL USDJPY 15100 exit 14970

Please don’t forget to place stoplosses on each and every trade ok. Trade safely n please Have a great weekend

Prepared by: Mr. SAM KIMA, Senior Vice President