The dollar index was little changed on Monday, trading near 99.75. Spot gold rose quickly in the short term and briefly broke through the $1,710 / oz mark. Investors will get a speech from federal reserve chairman colin Powell this week, along with U.S. inflation and retail sales data, which are expected to spark market activity this week.
This week, investors will continue to focus on the global pandemic and the resumption of economic activity in countries. The market also needs to focus ona trade deal between the two countries after President Donald trump said raising tariffs on China “is certainly an option” as he considers how to retaliate against China over the spread of novel coronavirus.
Us inflation comes with “scary Numbers” to keep an eye on Mr Powell’s speech
Investors will focus on U.S. inflation data for April on Tuesday and retail sales data for April on Friday.
Us inflation data for April will be released at 20:30 Beijing time on Tuesday. The U.S. consumer price index is expected to rise 0.4 percent in April from a 1.5 percent rise in April, according to media surveys. The U.S. core consumer price index is expected to rise at a 1.7 percent annual rate in April from 2.1 percent.
At 20:30 Beijing time on Friday, the us is expected to report an 11 percent monthly decline in retail sales for April, compared with an 8.7 percent drop in the previous month. Us retail sales figures are known as “scary Numbers” and often cause wild market swings.
“People’s expectations for the data to go down are still pretty solid,” said Ryan McKay, commodities strategist at TD Securities.
In addition, U.S. producer price data will be released on Wednesday, initial jobless claims on Thursday, and industrial production and the New York federal reserve’s manufacturing index on Friday.
Notably, fed chairman colin Powell is scheduled to speak on the economy at 9 a.m. local time on May 13 (9 p.m. Beijing time on May 13).
Analysts said Powell’s speech this week was crucial given recent market expectations of negative interest rates from the fed and could spark a market rout.
Gold prices hit 1,710
Spot gold rose sharply in Asian trading on Monday, breaking through the $1,710 / oz barrier and now as high as $1,711 / oz.
Last week, gold was broadly volatile, trading as high as $1,723.50 an ounce and as low as $1,682.50 an ounce, with a range of more than $40.
On Friday, following the release of the closely watched U.S. jobs report for April, gold quickly retreated after surging and hitting this week’s high to close just above the $1,700 mark.
Chris Weston, director of research at Pepperstone, said gold has reasons to rise in the face of global fiscal deficits, currency depreciation, negative interest rate bonds and inflation, and the next key level to watch is $1,738 an ounce.
“The gold market has been in the $1,738 to $1,678 range since mid-april,” Weston said. “it’s a very interesting phase to be in. If gold can effectively break through the $1,738 level, investor interest will pick up and the bullish trend will continue.”
Jeffrey Halley, senior market analyst at Oanda, said gold was still in the $1,650 to $1,750 area. “Until gold tests these two levels, investor interest will not be clear.”
As for this week’s moves, analysts and traders are bullish on the outlook for gold this week, according to the weekly financial market survey released by FX168 on Saturday.
Among traders and analysts surveyed in the weekly financial market survey, gold bulls accounted for 42.86 per cent, while bears and corrections were 28.57 per cent.
In addition, according to a survey released on Friday by Kitco, a well-known gold information website, institutions and retail investors are inclined to be bullish on the gold market, with six out of 11 Wall Street professionals (55 percent) saying they are optimistic about the outlook for the coming week. Three professionals (27 per cent) expect gold prices to fall, while two (18 per cent) are neutral.
Meanwhile, an online poll for ordinary investors showed 750 votes. A total of 502 investors, or 67 per cent, expect gold to rise this week. A further 139 (19%) had negative expectations and 109 (15%) were neutral.
TD Securities commodity strategist Ryan McKay says negative interest rates, likely early next year, will help gold out of its troubles and need to be watched this week.
Dollar investors watched Powell’s remarks
In the first half of last week, as the risk aversion in the market increased, funds poured into the us dollar, the dollar index rose for a time, breaking through the 100 mark and reaching a high of 100.41. The dollar retreated on Thursday on bets that the federal reserve would introduce negative interest rates, and continued its decline on Friday, though it has posted gains all week.
Last week, the federal reserve was surprised by negative interest rate expectations: in early trading on Thursday, the price of the January 2021 federal funds futures contract rose above 100.00, indicating that traders in the federal funds futures market expect the federal reserve may be forced to cut the policy rate to -0.002% in January.
U.S. federal funds rate futures contracts were trading in early trading on Tuesday, with traders expecting the federal reserve to cut the federal funds rate to negative territory as early as November.
In response, Wrightson ICAP economist Lou Crandall warned in a report Friday that the longer the fed tolerates negative interest rate expectations in futures markets, the more people will believe that overnight rates will follow.
Ebrahim Rahbari, chief G10 currency strategist at citi, said: “given the limited degree to which the market has so far priced in and the continuing fear that the us is’ devaluing ‘the dollar, the possibility of negative rates is a bit of a dollar negative.”
However, Ebrahim Rahbari added that a strong push by the United States for aggressive fiscal and monetary stimulus is expected to boost the U.S. economic recovery and attract capital inflows, supporting the dollar.
It is worth noting that, after the fed funds rate futures contract indicated that the fed would launch the negative interest rate as early as November this year, the fed suddenly announced that Powell would deliver a speech on 8th local time, then the interest rate futures turned around, significantly cooling the negative interest rate expectations.
Fed chairman colin Powell is due to speak on the economy on Wednesday and is bound to be asked about negative interest rate expectations. Analysts said the dollar could see a rally if Mr Powell’s speech reversed expectations of negative interest rates. In the event of a surprise, the dollar is set for a more aggressive sell-off.
On Saturday, FX168’s weekly financial markets survey showed analysts and traders taking a bearish tone on the dollar’s outlook.
Among traders and analysts polled in FX168’s weekly financial markets survey, the percentage of people who are bearish on the dollar is 42.86 percent, while the percentage who are bullish is 28.57 percent.
Atomic asset management (Hong Kong) LTD., founder and fund manager, said on Monday that the U.S. dollar index fell sharply last week, especially after the release of non-farm farm data on Friday. The index fell below 100.