Recent mood complex and volatile market, in the global outbreak still failed to fully control, the main countries in efforts to restart economic step by step, but affects investor’s geopolitical risk has become a “time bomb”, the uncertainty remains, china-us relations in the United States protests upgrades, investors in the economic and will restart coronavirus struggle, in the hope of vaccine and market movements in the contradiction between shock tear it.
Overall, the trend of dollar weakness further extended, has closed down for 6 consecutive trading days. Gold retreated after gains in the previous three trading sessions, and ended the day in negative territory.
The U.S. dollar index.DXY continued to struggle near lows in Asia Wednesday morning, extending its slide to a low of 97.43 in the previous session. International spot gold, meanwhile, was volatile, rising to a high of $1745.14 an ounce overnight, before retreating sharply to hit a low of $1721.20. Gold resumed its early losses and now suddenly accelerated to a low of $1,720 an ounce, dropping more than $10 from the session’s high and trading temporarily in the $1,725 area.
The rest of the session will focus on DATA such as MAY ADP employment and April durable goods orders, while The Bank of Canada is due to announce its interest rate decision and President Paul Boroz is due to bow out. If the U.S. ADP jobs data still doesn’t show significant signs of improvement, the dollar could suffer further and gold could rally, and vice versa.
The dollar and gold have both fallen because…
While the dollar continued to weaken, gold halted a 3-day run that saw it fall nearly 1 percent in the previous session as investors took profits and U.S. stocks rose on optimism that a novel Coronavirus shutdown would ease in major economies.
Although domestic turmoil in the US continues to intensify, this concern is overshadowed by optimism about the resumption of economic activity, with the focus remaining on the coVID-19 recovery. Meanwhile, the latest news shows no sign of the trade situation between China and the US worsening, despite earlier reports that China had suspended its purchases of US agricultural products, which had caused some concern in the market. According to Reuters, Chinese companies still bought at least three shipments of at least 180,000 tonnes of US soyabeans on Monday and will ship them in October or November. That combination boosted risk sentiment, sending money pouring out of dollar assets and into stocks.
U.S. stocks closed higher on Tuesday, with the S&P 500 up 0.8% at 3,080.82, up more than 40% from its intraday low in late March. The dow Jones industrial average rose 267.63 points, or 1.1%, to 25,742.65. The Nasdaq Composite index rose 0.6% to 9,608.37.
David Meger, director of metals trading at High Ridge Futures in New York, said it’s easy to see how gold could be a little vulnerable given the continued optimism about the economic restart and the continued rise in stocks.
But analysts said gold’s overall performance remained positive, having risen more than 18 per cent since hitting a near four-month low of $1,450.98 an ounce in March, helped by economic uncertainty caused by the outbreak and a series of stimulus measures from central Banks around the world.
Meanwhile, U.S. President Donald Trump’s vow this week in the White House Rose Garden to end unrest in major cities “immediately” gave safe-haven gold some support, limiting losses overnight.
Pentagon on ‘yellow alert’ as unrest Continues
On the domestic front, PENTAGON officials said force protection (FPCON) at the Pentagon and other defense facilities in the capital region had been raised to level 2, or Charlie, for fear of disruption from the protests, CNN reported.
The Pentagon’s current Charlie rating (yellow) is tier 2, which applies when there has been a terrorist attack, or when intelligence indicates that there may be some form of terrorist act or an attack on a person or facility, meaning that identity checks are stricter when entering a facility.
Military.com reported that Washington, DC, the capital, is bracing for more violent demonstrations and that the Pentagon has ordered the deployment of a military police battalion from Fort Bragg, North Carolina.
President Donald Trump said Monday he would take immediate presidential action to “stop the violence and restore the safety and security of the United States.”
The US military website said on Monday that a Pentagon official confirmed to it that the military police were from the 18th Airborne Army. The report said the official did not specify what orders the military police had received.
ABC news quoted a Defense Official as saying the unit has been sent to Washington, D.C., but will only be put on standby if needed.
On trade, the United States has a new move!
The office of the United States trade representative (ustr) on Tuesday announced it would open a section 301 investigation into digital taxes that some U.S. trade Allies have imposed or are planning to impose, with possible retaliatory tariffs depending on the outcome.
The office of the us trade representative said the us was investigating digital services taxes that Britain, Italy, Brazil and other countries have adopted or are planning to implement, a move that could lead to new punitive tariffs and raise trade tensions.
U.S. Trade Representative Robert Lighthizer said President Trump is concerned that tax measures taken by many trading partner countries are unfairly targeting American businesses, and we are prepared to take all appropriate steps to protect our businesses and workers from any such unfair treatment.
Such digital service taxes in several countries are seen as a way to raise taxes on Alphabet’s Google and Facebook’s local operations.
“President trump is concerned that many of our trading partners are using a tax system that unfairly targets our companies,” Mr. Lighthizer, the United States trade representative, said in a statement. “We are prepared to take appropriate steps to protect our businesses and workers from any such discrimination.”
The move came after the Commerce Department said it would investigate whether imports of vanadium violated national security rules, a sign that the Trump administration is aggressively pursuing new trade barriers even as coVID-19 is hitting the economy.
Small farm hit again tonight watch out for another big dollar sell-off!
On Wednesday, the U.S. will release the so-called “small nonfarm” ADP employment data for May. The current market forecast is for a reduction of 9 million, compared with the previous estimate of 20.236 million. After April’s precipitous drop, markets may not expect much from the ADP jobs report. At the same time, it will be interesting to see whether the pace and intensity of layoffs in the U.S. slows, and whether most retail stores closed because of the outbreak will reopen.
Fxstreet, a leading financial website, said it expected the small nonfarm data to have little impact on U.S. stocks, but was wary of possible moves in currency markets. The U.S. dollar has been falling for several sessions in recent days, with analysts suggesting that safe-haven funds have been increasingly flowing into the gold, silver and U.S. debt markets, and the dollar is losing its appeal. If the jobs Numbers explode again, the dollar index could tumble and non-U.S. currencies could rally.
Canada’s central bank has decided to call it quits on Mr Boroz
The Bank of Canada is due to announce its interest rate decision at 22:00 GMT on Wednesday and the market is expected to leave rates unchanged at 0.25 per cent. Meanwhile, an institutional survey expects the Bank of Canada to keep interest rates on hold at 0.25 per cent until the end of 2021, shifting the focus of the meeting to policy statements and governor’s speeches.
It is worth mentioning that the monetary policy meeting will be the curtain call for The governor of the Bank of Canada for seven years.
In May, Mr Moreno announced that Tiff Macklem, a former deputy governor of the Bank of Canada, would take over when Mr Polloz’s term ends. Will Boros surprise the market at this “curtain call”? Investors are waiting.
“The good times for risk markets continue,” said Mazen Issa, senior currency strategist at TD Securities, in a note. While this rally has been strong, it is likely to continue as the rally spreads beyond the US.”
“People know they need U.S. stocks, but they also need gold exposure because there’s so much uncertainty,” said Michael Matousek, head of trading at U.S. Global Investors in New York.
Weaker consumer demand and the gradual reopening of major economies to boost economic activity are weighing on gold prices, but the growing tests facing global economies, combined with the likely continued stimulus by central Banks and governments, are bullish, Kotak Securities said in a new report.
Bank of New York Mellon precious metals analyst Georgette Boele warned in a recent note to clients that gold risked a sharp fall as long as long positions remained crowded.
Abn Amro expects gold prices to fall sharply over the next three months on the back of another wave of risk sentiment in financial markets. ABN Amro forecasts gold at $1,725 an ounce by the end of the second quarter.