GOLD
Gold surged early on Tuesday, pushing XAU/USD to $2,200.03. The pair retreated early in the American session and currently trades around its daily opening in the $2,170 region amid a broad US Dollar recovery. The Greenback maintained a weak tone throughout the first half of the day but changed course following the release of mixed United States (US) macroeconomic data.

The US published February Durable Goods Orders, which were up 1.4% in February, better than the 1.3% anticipated and reversing the previous 6.9% slump. Additionally, the Conference Board Consumer Confidence Index declined further in March to 104.7 from a downwardly revised 104.8 in February. The former February estimate was 106.7, the lowest reading in four months. The report showed that the Expectations sub-index, which measures consumers’ short-term outlook for income, business, and labor market conditions, was sharply lower to 73.8. A reading below 80 indicates increased expectations of an upcoming recession. Finally, the Richmond Fed Manufacturing Index declined to -11 in March from -5 in the previous month.

The number of first-time applications for unemployment benefits declined to 210,000 in the week ending March 16, the US Department of Labor reported. Additionally, S&P Global Composite PMI came in at 52.2 in March’s flash estimate, suggesting that the business activity in the private sector continued to expand at a healthy pace. Assessing the PMI surveys’ findings, “a steepening rise in costs, combined with strengthened pricing power amid the recent upturn in demand, meant inflationary pressures gathered pace again in March

Meanwhile, the Swiss National Bank’s (SNB) unexpected decision to lower the policy rate by 25 basis points and the Bank of England’s (BoE) policy announcements triggered capital outflows out of Pound Sterling and Swiss Franc, providing an additional boost to the USD on Thursday. Two members of the BoE’s Monetary Policy Committee (MPC), Jonathan Haskel and Catherine Mann, voted in favor of a hold after voting for a 25 bps hike in the previous meeting, while Swati Dhingra continued to vote for a 25 bps cut.

The broad-based USD strength forces XAU/USD to stay on the back foot ahead of the weekend but the pair managed to erase a portion of its daily losses as the 10-year US yield edged lower.

Gold price jumped on Tuesday and retested psychological $2200 barrier, inflated by weaker dollar on improved sentiment about Fed rate cuts and persisting geopolitical risks.
Market awaits release of US inflation data, due later this week, which could bring fresh hints about timing of the start of rate cuts.

Fresh strength attacks the ceiling of the recent range, after a short-lived spike to new all-time high last week.

Bullish technical picture on daily chart contributes to positive sentiment and underpins the action.

Sustained break above $2200 to generate fresh bullish signal for retest of new top ($2222), violation of which to signal continuation of a larger uptrend and expose targets at $2250 (Fibo 138.2% projection of the uptrend from 2022 low at $1614) and $2300 (psychological).

Near-term bias is expected to remain firmly with bulls while the price action stays above 10DMA ($2171).

The eco calendar in Europe and the US this week is backloaded with the publication of key (national) EMU inflation data starting tomorrow and the Fed’s preferred inflation measure (PCE deflator) scheduled for release on Friday. Some less high profile data and CB comments in the meantime have to guide the day-to-day market dynamics post-Fed. However, data published today, were too close to expectations to provide any clear directional bias. German GFK consumer confidence improved slightly more than expected (-27.4 from -28.8), but this evidently won’t change the ECB’s assessment on (the start of/extent of) policy easing. German yields are ceding less than 1 bp across the curve. Somewhat of a similar wait-and-see narrative in the US. The March Philly Fed non-manufacturing business activity index in dropped more than expected from -8.8 to -18.3. Durable goods statistics were mixed. Headline orders printed slightly stronger than expected (1.4% M/M) as was the case fore core orders ex transportation (0.7%). At the same time, capital goods shipments non-defense ex aircraft delivered a slight miss with a -0.4% monthly decline. US house prices rises (S&P CoreLogic CS 20 city) slowed to 0.14% M/M, but this still resulted in a strong 6.59 Y/Y rise (from 6.15%). There is no one-on-one link with housing related components in the inflation gauges, but it probably won’t translate into a sharp decline in this key factor anytime soon. Last but not least, consumer confidence of the Conference Board, stabilized at 104.8 but last month was downward revised. Consumer remain upbeat in their current situation (151 from 147.8), but are turning more cautions in the future. Again a difficult mix from a market point of view. US yields currently are rising 1- 2 bps across the curve (benchmark change for the 2-y, -1.8 bps). The US 10-y real yield post Fed dropped back from 2%+ levels to 1.85% and last week/early this week and tries to turn north again. However, for now this has only a limited impact on risk assets or on the dollar. US equities again succeed modest gains (Nasdaq + 0.5%). Eurostoxx 50 also sets a new cycle top. Oil also holds north of $86 p/b.

On FX market, the dollar is again locked in tight ranges, with a tentative negative bias. DXY eases to 104.12, EUR/USD ‘rises’ to 1.085. The yen fails to gain against the US currency despite strong verbal interventions from Japanese authorities of late. At USD/JPY 151.4 the multi-year top (weakest for the yen) remains dangerously close-by. Sterling underperforms, even as BoE’s Mann (admittedly one of the hawkish members within the MPC) says markets are pricing in too many rate cuts. EUR/GBP (0.8585) again nears first resistance (support for sterling) at 0.8600/02.

The Australian dollar has extended its gains on Tuesday. In the European session, AUD/USD is trading at 0.6557, up 0.26%. On today’s data calendar, the US will release two tier-1 events. Durable goods orders are expected to rebound with a 1.1% gain in February, after a 6.1% slide in January. The Consumer Board consumer confidence index is expected to tick up to 107 in February, up from 106.7 in January.

Australian CPI expected to rise slightly in February

Australia’s inflation rate is expected to creep up in the February report, which will be released on Wednesday. The market estimate stands at 3.4% y/y for February, compared to 3.4% in January.
That could set back expectations for a rate cut from the Reserve Bank of Australia, which has kept rates unchanged at 4.35% for four straight times. The markets are of the view that the RBA’s tightening cycle is done and have priced in a rate cut later in the year. Still, the RBA hasn’t ruled out rate hikes, with inflation still well above the 2% target.

Prepared by: Mr. SAM KIMA, Senior Vice President