In early Asian trading, spot gold suddenly accelerated to near $1,540 an ounce. The U.S. Treasury earlier dropped its designation of China as a currency manipulator, further stoking risk appetite and weighing on gold prices. The release of key us CPI data tonight Beijing time is expected to trigger market volatility. Investors will also be watching for the latest developments in trump’s impeachment proceedings, with Democrats in the US house of representatives expected to vote on Tuesday on when to formally introduce articles of impeachment to the Senate, a move that is expected to draw another rebuke from trump.
The us Treasury on Monday formally dropped its decision to label China a currency manipulator last year, in what was seen as another sign of a thaw in us-china relations.
“The Treasury has decided that China should no longer be listed as a currency manipulator at this time,” the Treasury said in its semi-annual report on currency intervention.
Spot gold came under pressure in early trading in Asia on the news, after falling sharply in the short term to as low as $1,541.60 an ounce.
Indeed, gold has come under pressure recently as tensions between the US and Iran have eased and amid optimism about us-china trade.
Gold fell overnight, Orchard Forex analyst Jim Langlands wrote in a recent note on Tuesday. From the technical charts, gold has the potential to fall further.
The US Treasury said the first phase of the trade deal, to be signed this week, contained enforceable Chinese commitments not to devalue the renminbi and not to set exchange rate targets for competitive purposes.
The US Treasury Department reported that it had labeled China a currency manipulator after it “took concrete steps” to devalue the renminbi this summer. The report said the yuan rose in October after falling to 7.18 against the dollar in early September.
Earlier Monday, a report from the fox business network showed the first shift in the Treasury’s attitude toward China. This has led to a continuation of the renminbi’s recent gains.
On January 13th the onshore and offshore renminbi hit new five-and-a-half-month highs against the dollar, breaking the 6.90 marks. The onshore yuan gained 348 points and the offshore yuan gained 315 points.
The Treasury report concludes that there are 10 countries whose exchange rate policies need to be closely monitored, but that none of the major U.S. trading partners meet the criteria set by two foreign exchange manipulation laws passed in 1988 or 2015.
Countries worth examining are China, Germany, Ireland, Italy, Japan, South Korea, Malaysia, Singapore, Switzerland, and Vietnam.
It notes that there has been less intervention in currency markets, partly because the dollar has been generally strong relative to its historical average, so countries do not have to deal with currency appreciation.
The U.S. Treasury said the real dollar is still 8 percent above its 20-year average and continued dollar strength could exacerbate persistent trade and current account imbalances. The dollar’s continued strength is “worrying”, based on the international monetary fund’s judgment that it is “overvalued” on a basis of real efficiency.
The report notes that despite President trump’s efforts to reduce the US trade deficit, the deficit in non-oil products has risen to an all-time high of more than 4 percent of GDP.
Meanwhile, the U.S. Treasury Department is calling on Germany, the Netherlands, and South Korea to use some of their fiscal space for massive growth-boosting stimulus measures.
The US CPI is coming
On Tuesday, at 21:30 Beijing time, the U.S. consumer price index for December, the most closely watched economic indicator of the session, is expected to trigger market volatility.
U.S. consumer prices are expected to rise by 0.2 percent in December after rising 0.3 percent last month, according to media surveys. The revised monthly core consumer price index is expected to rise by 0.2 percent in December after rising 0.2 percent last month.
The U.S. consumer price index is expected to rise 2.4 percent at a seasonally adjusted annual rate in December after rising 2.1 percent the previous month, the survey showed. The U.S. core consumer price index is expected to rise at a 2.3 percent annualized rate in December after rising 2.3 percent the previous month.
Analysts said the performance of the inflation data was crucial to fed policy. If core CPI doesn’t pick up soon or even fall further, the fed could still cut rates.
Td securities expect the monthly consumer price index to rise 0.3 percent in December, while the annualized rate is likely to rise to 2.4 percent from 2.1 percent in December.
Among the week’s key U.S. economic data, Bart Melek, head of global strategy at TD Securities, said the most important was the CPI.
If the U.S. CPI data falls short of expectations, the dollar could come under pressure, which would be good news for gold, which has been under recent downward pressure.
Melek said any disappointing economic data would have a positive impact on gold.
Mitsubishi economist Jonathan Butler explains that the data are crucial because they provide insight into the future direction of monetary policy for the fed, which still has room to cut rates further or launch quantitative easing.
Focus on the trump impeachment gate
On Sunday, House Speaker Nancy Pelosi said House Democrats will vote on Tuesday on when to formally introduce articles of impeachment to the senate.
Pelosi stressed that republicans in the senate would pay a political price if they refused to call new witnesses in the impeachment trial.
House Speaker Nancy Pelosi said on Friday that she would direct the house of representatives to send articles of impeachment to the Senate this week.
Earlier, Pelosi repeatedly delayed plans to introduce articles of impeachment for President Donald Trump after failing to reach an agreement with the senate on the terms of his impeachment trial.
But pressure is mounting on Ms. Pelosi to file articles of impeachment, not only from Republicans but also from Democrats.
Before the articles can be submitted, the house still has to vote on the names of the administrators or members of the house who will act as prosecutors in the Senate trial of the President.
On December 8, 2019, the US house of representatives passed two articles of impeachment against President Trump, namely “abuse of power” and “obstruction of congressional investigation”.
On Jan. 11, Trump accused Pelosi and the Democrats, reiterating that democratic hearings were “unfair and biased” and “have no effect other than to prove my complete innocence.” Mr. Trump also repeated his claim that ms Pelosi would be “the worst speaker of the house in history”.
In a senate trial, if more than a two-thirds majority finds President trump guilty, he will be fired and vice President pence will take over. But if no more than two-thirds of lawmakers believe he is guilty, he will be fully pardoned and remain in office.
In the current senate, republicans hold 53 seats, Democrats 45 and independents two. With the vast majority of Republicans saying they support Mr. Trump, the chances of him being impeached from office are slim.