Original article by Eamonn Sheridan, adapted and expanded for clarity and depth.
Title: Asia-Pacific Forex and Market Overview: Gold Breaks Record Above USD 2,350 Amid Mixed Market Signals
Date: April 9, 2024
Author: Adapted from Eamonn Sheridan’s market update posted on ForexLive
The Asia-Pacific trading session on April 9, 2024, was marked by a continuation of recent global trends, including surging gold prices, tempered currency movements, and anticipation ahead of key economic data releases from the United States. The action in Asian financial markets was generally subdued, but not without important developments, particularly in commodities such as precious metals.
Gold Continues Record-Breaking Surge
Gold remained the center of attention during the Asia session as it extended recent gains and pushed to yet another all-time high.
– Spot gold reached as high as USD 2,365 during the session
– This move builds on gold’s recent bullish momentum, which has seen its price increase by nearly 20% since February
– The recent spike comes despite a stronger US dollar and rising US bond yields, defying traditional inverse correlations
The primary drivers behind the ongoing rally include:
– Elevated geopolitical tensions in Eastern Europe and the Middle East, spurring demand for safe-haven assets
– Central bank gold purchases, especially from countries like China and Russia, which have added reserves amid efforts to diversify away from the USD
– Ongoing demand from investors seeking inflation protection or anticipating a possible rate cut cycle by central banks later in 2024
– Technical breakouts, with algorithmic and momentum-based traders accelerating upside once key resistance levels were cleared
Market observers noted that even with the stronger US dollar and higher Treasury yields, gold has continued to push higher, suggesting that real demand (both institutional and retail) is overpowering traditional macroeconomic correlations.
Forexlive analyst Eamonn Sheridan commented on the anomaly, pointing out that “Normally these would be drags on the price of gold, but clearly not at the moment.” The resilience of the precious metal has led some to question whether market expectations for the pace of Federal Reserve monetary easing are more dovish than recent Fed commentary implies.
USD Strength Continues Ahead of Key US CPI
Moves in the foreign exchange market were more measured than the rally in precious metals, as traders looked cautiously ahead to Wednesday’s US Consumer Price Index (CPI) data release and the minutes from the March Federal Open Market Committee (FOMC) meeting.
– The US dollar index (DXY) remains firm, supported by strong labor market data last week and reduced expectations of imminent Fed rate cuts
– USD/JPY continued to rise slightly, trading above 151.80 by the end of the Asia session
– EUR/USD hovered near 1.0850 with limited movement, while GBP/USD traded slightly higher at 1.2660
The dollar’s strength has been underpinned by:
– Friday’s strong US employment report, which showed continued labor market tightness
– Reduced speculation of rate cuts from the Fed occurring as early as June
– Recent Federal Reserve commentary maintaining a cautious tone about easing inflationary risks
All eyes now turn to the US CPI report for March, set to be released on April 10, which will offer the latest inflation metrics and could either reaffirm or challenge current market pricing for the Fed’s next moves.
Key US CPI Forecasts:
– Headline CPI (month-on-month): +0.3%
– Headline CPI (year-on-year): +3.4%
– Core CPI (month-on-month): +0.3%
– Core CPI (year-on-year): +3.7%
Should inflation surprise to the upside, it may lend further support to the dollar and weigh on risk assets. A softer-than-expected print could reignite speculation about a potential rate cut in July or even June.
Japanese Yen Under Pressure
USD/JPY edged further upward,
Explore this further here: USD/JPY trading.