Articles

• ECB’s Schnabel is speaking on Wednesday
• Australian inflation data earlier “close but no ….” rate cut
• Bank of Japan Policy Meeting Preview – Don’t Hold Your Breath for a Hike
• Australian inflation data – what could drive a December Reserve Bank of Australia rate cut
• Bank of Canada Governor Macklem and Deputy Rogers are speaking again on Wednesday
• PBOC sets USD/ CNY mid-point today at 7.1390 (vs. estimate at 7.1398)
• AUD/USD little changed after the Australian inflation data – minor wobble
• Australian Q3 inflation headline 2.8% y/y (expected 2.9%)
• UK budget: Commerzbank analysts optimistic about long-term growth potential
• Eastern Japan exits “zero nuclear power plants” – Onagawa 2 shut in 2012, restarted now
• US election – Women are far outpacing men in voting early.
• Goldman Sachs forecast gold to climb higher than previously expected, target $2,900 /ounce
• US jobs report Friday “will likely be messier than usual … recent hurricanes and strike”
• US oil and gas production climbed to record highs under Biden, this election won’t impact
• Recent surge in US mortgage rates a taste of what’s to come
• ICYMI – Japan economy minister Akazawa warned on impacts of a weak yen
• Chair Schlegel – Swiss National Bank could cut interest rates further in coming quarters
• MUFG says US dollar to rise if Trump wins, but much of it priced in already
• Oil – private survey of inventory shows a headline crude oil draw vs. build expected
• Private survey of oil inventories shows surprise headline draw
• Forexlive Americas FX news wrap: US job openings take a surprise fall
• Bank of Canada Governor Macklem says beginning to see the impact of recent rate cuts
• Alphabet beats: EPS 2000 $2.12 versus $1.84. Rev $88.27 billion versus $86.31 billion
• NASDAQ index closes at a new record level
• Trade ideas thread – Wednesday, 30 October, insightful charts, technical analysis, ideas

It
was another subdued session for major FX. Political
machinations in Japan to form the next government continue, and they did so
today against the backdrop of a quiet yen. USD/JPY has barely tracked
a 30 point range.

On
the data agenda were Australian inflation figures:

• the
  Q3 headline rate came in at 2.8% y/y, below the top of the 2-3% RBA
  target band and its lowest since early 2021
• the
  Q3 core ‘trimmed mean’ y/y came in at a still lofty 3.5%
• interestingly,
  the y/y for September month came in at 2.1% – the monthly reads are
  not the ‘official’ CPI rate, but encouraging nonetheless

The
caveat to the low headline rate is that it benefitted from government
temporary rebates and subsidies (cost of living relief). These will
roll off and headline inflation is likely to pop back up again in the
quarters ahead.

The
data barely moved the needle on RBA rate cut expectations, many
analysts (not all) favour a February 2025 cut while market pricing is
looking to May 2025. AUD/USD didn’t move around much, a slight dip
and rally and since has lost ground to its session low, helped along
by a broader USD bid.

EUR,
NZD, CAD, GBP have all lost a little ground against the USD. There is
little fresh news flow.

This article was written by Eamonn Sheridan at www.forexlive.com.

IC Markets Asia Fundamental Forecast | 30 October 2024

What happened in the U.S. session?

After falling from 105.6 in August to 99.2 in September, the Conference Board (CB) Consumer Confidence survey rebounded in October with a reading of 108.7 as consumers regained faith in the U.S. economy. Consumer confidence recorded the strongest monthly gain since March 2021 but it still remains constrained within a narrow range that has prevailed over the past two years. 

Meanwhile, job openings extended its downward trend with 7.44M vacancies recorded in September while August’s reading of 8.04M was revised lower to 7.86M. Not only have openings dwindled lower, but September’s reading was also lower than the market forecast of 7.98M.

The mixed macroeconomic data injected high volatility for the greenback causing the dollar index (DXY) to fluctuate wildly. After hitting a high of 104.63, the DXY plunged down to 104.29 before rebounding to 104.54 following the above data releases before it settled around 104.25 by the end of this session.

What does it mean for the Asia Session?

The monthly CPI reading fell sharply from 3.5% YoY in July down to 2.7% YoY in August while the annual reading accelerated slightly from 3.6% in the first quarter to 3.8% YoY in the second quarter of 2024. September’s estimate of 2.3% YoY for the monthly indicator points to further easing and should inflationary pressures continue to dissipate further in the land down under, the Aussie could face significant headwinds this morning.

The Dollar Index (DXY)

Key news events today

ADP Employment Report (12:15 pm GMT)

GDP (12:30 pm GMT)

What can we expect from DXY today?

After highlighting a widespread employment rebound in September with 143K jobs being added to private payrolls, the estimate of just 110K for August points to a return to slower job creation as observed in July and August. This forecast sits well below the 12-month average of 144K and should job creation slow more than originally anticipated, it could spark a huge sell-off in the dollar.

After which, the advance GDP estimate for the third quarter of 2024 shows the U.S. economy expanding at an annual rate of 3.0% – matching the final result for the second quarter. Economic activity has been chugging along steadily since the second half of 2022 and a stronger reading could boost the dollar. Whatever the outcomes from the above data announcements, the dollar is certain to face much higher volatility during the U.S. session.

Central Bank Notes:

• The Federal Funds Rate target range was reduced by 50 basis points to 4.75% to 5.00% on 18th September in an 11 to 1 vote with Governor Michelle Bowman dissenting, preferring to cut rates by a smaller amount.
• The Committee seeks to achieve maximum employment and inflation at the rate of 2% over the longer run and has gained greater confidence that inflation is moving sustainably toward 2%, and judges that the risks to achieving its employment and inflation goals are roughly in balance.
• The economic outlook is uncertain, and the Committee is attentive to the risks to both sides of its dual mandate.
• Recent indicators suggest that economic activity has continued to expand at a solid pace while job gains have slowed, and the unemployment rate has moved up but remains low.
• Inflation has made further progress toward the Committee’s 2% objective but remains somewhat elevated.
• In considering any adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks and does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2%.
• In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook and would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals.
• In addition, the Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities. Beginning in June, the Committee slowed the pace of decline of its securities holdings by reducing the monthly redemption cap on Treasury securities from $60 billion to $25 billion.
• The Committee will maintain the monthly redemption cap on agency debt and agency mortgage-backed securities at $35 billion and will reinvest any principal payments in excess of this cap into Treasury securities.
• Next meeting runs from 6 to 7 November 2024.

Next 24 Hours Bias

Weak Bearish

Gold (XAU)

Key news events today

ADP Employment Report (12:15 pm GMT)

GDP (12300 pm GMT)

What can we expect from Gold today?

After highlighting a widespread employment rebound in September with 143K jobs being added to private payrolls, the estimate of just 110K for August points to a return to slower job creation as observed in July and August. This forecast sits well below the 12-month average of 144K and should job creation slow more than originally anticipated, it could spark a huge sell-off in the dollar.

After which, the advance GDP estimate for the third quarter of 2024 shows the U.S. economy expanding at an annual rate of 3.0% – matching the final result for the second quarter. Economic activity has been chugging along steadily since the second half of 2022 and a stronger reading could boost the dollar. Whatever the outcomes from the above data announcements, gold is certain to face much higher volatility during the U.S. session.

Next 24 Hours Bias

Medium Bullish

The Australian Dollar (AUD)

Key news events today

CPI (12:30 am GMT)

What can we expect from AUD today?

The monthly CPI reading fell sharply from 3.5% YoY in July down to 2.7% YoY in August while the annual reading accelerated slightly from 3.6% in the first quarter to 3.8% YoY in the second quarter of 2024. September’s estimate of 2.3% YoY for the monthly indicator points to further easing and should inflationary pressures continue to dissipate further in the land down under, the Aussie could face significant headwinds this morning.

Central Bank Notes:

• The RBA kept the cash rate target unchanged at 4.35% on 24th September, marking the seventh consecutive pause.
• Inflation has fallen substantially since its peak in 2022, as higher interest rates have been working to bring aggregate demand and supply closer towards balance but it is still some way above the midpoint of the 2 to 3% target range.
• The trimmed-mean CPI was 3.9% YoY in the June quarter, broadly as forecast in the May Statement on Monetary Policy (SMP) while headline inflation declined in July as measured by the monthly CPI indicator.
• Headline inflation is expected to fall further temporarily but current forecasts do not see inflation returning sustainably to target until 2026.
• GDP data for the June quarter have confirmed that growth has been weak but growth in aggregate consumer demand, which includes spending by temporary residents such as students and tourists, remained more resilient.
• Broader indicators suggest that labour market conditions remain tight, despite some signs of gradual easing while wage pressures have eased somewhat.
• Data since then have reinforced the need to remain vigilant to upside risks to inflation and the Board is not ruling anything in or out while agreeing that policy will need to be sufficiently restrictive until the Board is confident that inflation is moving sustainably towards the target range.
• The Board will continue to rely upon the data and the evolving assessment of risks to guide its decisions and will pay close attention to developments in the global economy and financial markets, trends in domestic demand, and the outlook for inflation and the labour market.
• Next meeting is on 5 November 2024.

Next 24 Hours Bias

Weak Bullish

The Kiwi Dollar (NZD)

Key news events today

No major news events.

What can we expect from NZD today?

The Kiwi remains in a strong downtrend as it hit a low of 0.5953 on Tuesday. This currency pair retraced higher towards 0.5980 at the beginning of the Asia session – these are the support and resistance levels for today.

Support: 0.5960

Resistance: 0.5990

Central Bank Notes:

• The Monetary Policy Committee agreed to reduce the OCR by 50 basis points, bringing it down to 4.75% in October as inflation converges to target.
• The Committee assesses that annual consumer price inflation is within its 1 to 3% inflation target range and converging on the 2% midpoint.
• Economic activity in New Zealand is subdued, in part due to restrictive monetary policy while business investment and consumer spending have been weak, and employment conditions continue to soften.
• The economy is now in a position of excess capacity, encouraging price- and wage-setting to adjust to a low-inflation economy; lower import prices have assisted the disinflation.
• High-frequency indicators point to continued subdued growth in the near term, mostly due to weak consumer spending and business investment while labour market conditions are expected to ease further, with filled jobs and advertised vacancy rates continuing to decline.
• The Committee confirmed that future changes to the OCR would depend on its evolving assessment of the economy.
• Next meeting is on 27 November 2024.

Next 24 Hours Bias

Weak Bullish

The Japanese Yen (JPY)

Key news events today

No major news events.

What can we expect from JPY today?

The yen continues to remain under pressure as USD/JPY hit a high of 153.86 on Tuesday. With the Bank of Japan’s (BoJ) monetary policy meeting taking place on Thursday, 31st of October, the yen could depreciate even further should the BoJ keep rates on hold for the third consecutive meeting. This currency pair was hovering above 153 as Asian markets came online – these are the support and resistance levels for today.

Support: 151.70

Resistance: 154.00

Central Bank Notes:

• The Policy Board of the Bank of Japan decided, by a unanimous vote, to set the following guideline for money market operations for the intermeeting period:
  1. The Bank will encourage the uncollateralized overnight call rate to remain at around 0.25%.
  2. The Bank will embark on a plan to reduce the amount of its monthly outright purchases of JGBs so that it will be about 3 trillion yen in January-March 2026; the amount will be cut down by about 400 billion yen each calendar quarter in principle.
• The year-on-year rate of increase in the consumer price index (CPI, all items less fresh food) has been in the range of 2.5 to 3.0% recently, as services prices have continued to rise moderately, reflecting factors such as wage increases, although the effects of a passthrough to consumer prices of cost increases led by the past rise in import prices have waned.
• Meanwhile, underlying CPI inflation is expected to increase gradually, since it is projected that the output gap will improve and that medium- to long-term inflation expectations will rise with a virtuous cycle between wages and prices continuing to intensify.
• In the second half of the projection period of the July 2024 Outlook for Economic Activity and Prices, it is likely to be at a level that is generally consistent with the price stability target.
• Japan’s economy has recovered moderately, although some weakness has been seen in part, but it is likely to keep growing at a pace above its potential growth rate, with overseas economies continuing to grow moderately and as a virtuous cycle from income to spending gradually intensifies against the background of factors such as accommodative financial conditions.
• Next meeting is on 31 October 2024.

Next 24 Hours Bias

Weak Bullish

The Euro (EUR)

Key news events today

GDP (10:00 am GMT)

What can we expect from EUR today?

GDP output in the Euro Area has been muted over the past four quarters and the ECB will be hoping that the recent rate cuts will spur the economy. Following a rise of 0.2% QoQ in the second quarter of 2024. The flash estimate points to a gain of 0.2% QoQ for the third quarter. Should the flash result miss market expectations, it could weigh on the Euro during the European trading hours.

Central Bank Notes:

• The Governing Council today decided to reduce the three key ECB interest rates by 25 basis points on 17th October to mark the second successive rate cut.
• Accordingly, the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will be decreased to 3.40%, 3.65% and 3.25% respectively.
• The incoming information on inflation shows that the disinflationary process is well on track while the inflation outlook is also affected by recent downside surprises in indicators of economic activity.
• Inflation is expected to rise in the coming months, before declining to target in the course of next year. Domestic inflation remains high, as wages are still rising at an elevated pace. At the same time, labour cost pressures are set to continue easing gradually, with profits partially buffering their impact on inflation.
• The Eurosystem no longer reinvests all of the principal payments from maturing securities purchased under the pandemic emergency purchase programme (PEPP), reducing the PEPP portfolio by €7.5 billion per month on average and the Governing Council intends to discontinue reinvestments under the PEPP at the end of 2024.
• The Council is determined to ensure that inflation returns to its 2% medium-term target in a timely manner and will keep policy rates sufficiently restrictive for as long as necessary to achieve this aim and is not pre-committing to a particular rate path.
• Next meeting is on 12 December 2024.

Next 24 Hours Bias

Weak Bullish

The Swiss Franc (CHF)

Key news events today

SNB Chairman Schlegel Speaks (9:00 am GMT)

What can we expect from CHF today?

SNB Governing Board Chairman Martin Schlegel will be speaking at a news conference in Bern. After being appointed as the new Chairman of the Governing Board by the Federal Council on the 26th of June, markets will be keeping a close ear on what he has to say at this conference. Traders should brace themselves for higher volatility for the franc during this event.

Central Bank Notes:

• The SNB eased monetary policy by lowering its key policy rate by 25 basis points for the third consecutive meeting, going from 1.25% to 1.00% in September.
• Inflationary pressure has again decreased significantly compared to the previous quarter, reflecting the appreciation of the Swiss franc over the last three months.
• Inflation in the period since the last monetary policy assessment was lower than expected, standing at 1.1% in August compared to 1.4% in May.
• The new conditional inflation forecast is significantly lower than that of June: 1.2% for 2024, 0.6% for 2025 and 0.7% for 2026, based on the assumption that the SNB policy rate is 1.0% over the entire forecast horizon.
• Swiss GDP growth was solid in the second quarter of 2024 as momentum in the chemicals/pharmaceuticals industry was particularly strong.
• However, growth is likely to remain rather modest in the coming quarters due to the recent appreciation of the Swiss franc and the moderate development of the global economy.
• The SNB anticipates GDP growth of around 1% this year while currently expecting growth of around 1.5% for 2025.
• Further cuts in the SNB policy rate may become necessary in the coming quarters to ensure price stability over the medium term.
• Next meeting is on 12 December 2024.

Next 24 Hours Bias

Weak Bullish

The Pound (GBP)

Key news events today

Autumn Forecast Statement (Tentative)

What can we expect from GBP today?

The Autumn Forecast Statement is a document that is released annually which provides an updated economic outlook and previews the government’s budget for the coming year, including expected spending and income levels, borrowing levels, and financial objectives. It also contains comments on the latest independent economic forecasts prepared by the Office for Budget Responsibility (OBR). Any unexpected changes to the budget proposal could have a significant impact on the Pound.

Central Bank Notes:

• The Bank of England’s Monetary Policy Committee (MPC) voted by a majority of 8 to 1 to maintain Bank Rate at 5.0% while one member preferred to reduce Bank Rate by 25 basis points to 4.75%, on 19th September 2024.
• The MPC also voted unanimously to reduce the stock of UK government bond purchases held for monetary policy purposes, and financed by the issuance of central bank reserves, by £100B over the next 12 months to a total of £558B.
• Twelve-month CPI inflation had been 2.2% in August and July, slightly lower than August Report expectations. Consumer core goods and food price inflation had remained subdued as the cost pressures from previous global shocks had unwound further, and producer price levels had been broadly flat while energy prices had continued to drag on CPI inflation.
• Services price inflation had increased to 5.6% in August compared to 5.2% in July and 5.7% in June. This was slightly lower in August than had been expected at the time of the August Report. There had been volatility in a number of services sub-components in the July and August outturns, including accommodation and catering prices and airfares.
• GDP had increased by 0.6% in 2024 Q2, 0.1 percentage points lower than had been expected in the August Monetary Policy Report. That had followed 0.7% growth in Q1, but Bank staff judged that the underlying pace of growth had been somewhat weaker during the first half of the year. 
• Headline GDP growth was expected to return to its underlying pace of around 0.3% per quarter in the second half of the year. Based on a broad set of indicators, the MPC judged that the labour market continued to loosen but that it remained tight by historical standards.
• Monetary policy decisions have been guided by the need to squeeze persistent inflationary pressures out of the system so as to return CPI inflation to the 2% target both in a timely manner and on a lasting basis; policy has been acting to ensure that inflation expectations remain well anchored.
• In the absence of material developments, a gradual approach to removing policy restraint remains appropriate while monetary policy will need to continue to remain restrictive for sufficiently long until the risks to inflation returning sustainably to the 2% target in the medium term have dissipated further.
• The Committee continues to monitor closely the risks of inflation persistence and will decide the appropriate degree of monetary policy restrictiveness at each meeting.
• Next meeting is on 7 November 2024.

Next 24 Hours Bias

Weak Bullish

The Canadian Dollar (CAD)

Key news events today

BoC Gov Macklem Speaks (8:15 pm GMT)

What can we expect from CAD today?

Bank of Canada (BoC) Governor Tiff Macklem will once again be testifying along with Senior Deputy Governor Carolyn Rogers before the House of Commons Standing Committee on Finance in Ottawa following last week’s monetary policy announcement. The Loonie has depreciated tremendously in October and could face higher volatility later today.

Central Bank Notes:

• The Bank of Canada reduced its target for the overnight rate by 50 basis points bringing it down to 3.75% while continuing its policy of balance sheet normalization on 23rd October; this marked the fourth consecutive meeting where rates were reduced.
• Canada’s economy grew at around 2% in the first half of the year and growth of 1.75% is expected in the second half; consumption has continued to grow but is declining on a per person basis while exports have been boosted by the opening of the Trans Mountain Expansion pipeline.
• Overall, the Bank forecasts GDP growth of 1.2% in 2024, 2.1% in 2025, and 2.3% in 2026 – as the economy strengthens, excess supply is gradually absorbed.
• The labour market remains soft with unemployment at 6.5% in September while wage growth remains elevated relative to productivity growth. Overall, the economy continues to be in excess supply.
• Headline CPI has declined significantly from 2.7% in June to 1.6% in September while shelter costs inflation remains elevated but has begun to ease; the preferred measures of core inflation are now below 2.5%.
• Excess supply elsewhere in the economy has reduced inflation in the prices of many goods and services while the drop in global oil prices has led to lower gasoline prices – these factors have all combined to bring inflation down.
• The Bank expects inflation to remain close to the target over the projection horizon, with the upward and downward pressures on inflation roughly balancing out; the upward pressure from shelter and other services gradually diminishes, and the downward pressure on inflation recedes as excess supply in the economy is absorbed.
• With inflation now back around the 2% target, the Governing Council decided to reduce the policy rate by 50 basis points to support economic growth and keep inflation close to the middle of the 1% to 3% range.
• If the economy evolves broadly in line with the latest forecast, further reduction of the policy rate can be expected but the timing and pace of additional reductions in the policy rate will be guided by incoming information and assessment of its implications for the inflation outlook.
• The Bank is committed to maintaining price stability for Canadians by keeping inflation close to the 2% target.
• Next meeting is on 11 December 2024.

Next 24 Hours Bias

Medium Bullish

Oil

Key news events today

EIA Crude Oil Inventories (2:30 pm GMT)

What can we expect from Oil today?

After last week’s higher-than-anticipated inventory build, the API stockpiles beat market expectations with a drawdown of 0.6M barrels of crude versus a 2.3M-increase on Tuesday. Prices for crude oil have lost over 6% this week but they have now steadied on Wednesday due to shrinking inventories. WTI oil stabilized around $67.50 per this morning and could receive another boost should the EIA inventories also register a large drawdown later today.

Next 24 Hours Bias

Weak Bearish

The post IC Markets Asia Fundamental Forecast | 30 October 2024 first appeared on IC Markets | Official Blog.

Inflation data from Australia for the July – September quarter and for September month.

• 2.8% y/y headline, below the top of the RBA target band of 2 – 3%.
• Trimmed means is a core measure, comes in at 3.5% y/y

The other measure of core inflation is ‘weighted median’:

0.9% q/q

• expected 0.8%, prior 0.8%

3.8% y/y

• expected 3.6%, prior 4.1%

Headline inflation has benefitted from government paying temporary rebates and subsidies. These will roll off and headline inflation is likely to pop back up again in the quarters ahead.

The Reserve Bank of Australia meet again on November 4 and 5. There will be no rate cut at this meeting given these numbers.

There is a final meeting on December 9 -10 and I’d suggest no cut then either. February remains a top choice among analysts.

***************

This article was written by Eamonn Sheridan at www.forexlive.com.

The UK budget is due later today, Wednesday, October 30, 2024.

Commerzbank analysts give a heads up for GBP gains:

• if the budget combines austerity with hope of tackling long-term investment
• “This should be positive for the pound as it would strengthen the U.K.’s long-term growth potential”
• government faces a challenge in facilitating investment so that it ends years of underfunding in the public sector
• Challenge is that the UK has spent more than it has earned in recent years, making the fiscal situation difficult

GBP has already tikced up in the day leading to the budget:

This article was written by Eamonn Sheridan at www.forexlive.com.

AP with the report:

• A Japanese nuclear reactor which survived a massive 2011 earthquake and tsunami that badly damaged the nearby Fukushima nuclear power plant was restarted Tuesday for the first time since the disaster after a safety upgrade, as the government pursues a renewed expansion of nuclear energy to provide stable power and reduce carbon emissions.
• The No. 2 reactor at the Onagawa nuclear power plant on Japan’s northern coast was put back online and is expected to start generating power in early November
• reactor is one of the three at the Onagawa plant, which is 100 kilometers (62 miles) north of the Fukushima Daiichi plant where three reactors melted following a magnitude 9.0 earthquake and tsunami in March 2011
• The Onagawa plant was hit by a 13-meter (42-foot) tsunami but was able to keep its crucial cooling systems functioning in all three reactors and achieve their safe shutdowns.

Japan imports a lot of its energy needs. The restarting of this reactor will be followed by others and will be welcome.

Link to the report for more.

This article was written by Eamonn Sheridan at www.forexlive.com.

I’d noted this info on Monday but now the pundits are picking it up.

POLITICO is a US politics website. In brief:

• Across battlegrounds … Women account for roughly 55 percent of the early vote, while men are around 45 percent, according to a POLITICO analysis of early vote data in several key states.
• The implications for next week’s election results are unclear
• It’s impossible to know who these women are voting for
• “In some states women are actually exceeding their vote share from 2020, which is at this point shocking to me,” said Tom Bonier, a Democratic strategist and CEO of the data firm TargetSmart.
• female turnout comes as Harris zeroes in on moderate suburban women — and particularly non-college educated, white women — in the final days of the campaign, aiming to drive them to the polls with the enthusiasm they showed in the midterm elections, right after the Supreme Court overturned Roe v. Wade.

Before you go ballistic with abusive comments:

• It’s also not clear that the increased turnout among women is uniformly beneficial for Democrats, given the significant numbers of Republican women who are showing up to early vote as well.

Read the full piece for more.

• Here is the link for much more detail.

Then, if you want to abuse me for posting factual information, go right ahead. LOL.

Random voting pic.

This article was written by Eamonn Sheridan at www.forexlive.com.

Goldman Sachs Research anticipates a bullish outlook for gold, projecting prices to reach $2,900 per ounce by early 2025, up from a prior forecast of $2,700. This optimism is largely attributed to a surge in gold purchases by central banks, especially in emerging markets. Traditionally, gold prices align closely with interest rate trends—lower rates often boost gold’s appeal as a non-yielding asset. However, significant central bank buying since 2022 has shifted this dynamic, with Goldman estimating that an additional 100 tonnes of physical gold demand can lift prices by around 2.4%.

This surge in demand is partly driven by a desire for financial security, especially after the freezing of Russian central bank assets in 2022, which raised concerns over sanctions risks. Emerging market central banks, which typically have smaller gold reserves compared to developed nations, appear to be “catching up” as a buffer against potential geopolitical and fiscal risks. With the U.S. debt at 124% of GDP, policymakers are increasingly wary of overreliance on U.S. Treasury bonds.

Western investor interest in gold is also picking up, particularly in light of the upcoming U.S. presidential election and heightened concerns over trade tensions and fiscal stability. Although many investors are cautious about gold’s record-high prices, Goldman Sachs expects Western-held gold ETFs to gradually increase as interest rates fall, potentially leading to a competitive dynamic between central banks and investors for gold reserves.

This article was written by Eamonn Sheridan at www.forexlive.com.

A reminder that the October nonfarm payrolls report could be difficult to interpret.

Says Claudia Sahm:

• Jobs Day will likely be messier than usual with recent hurricanes and a strike weighing temporarily on payrolls. Even with solid underlying growth the headline could look rough.
• October will likely be tough to watch. More than ever, we must read through the details carefully.

  Beware of the scary headlines.

And concludes with the 2017 hurricane:

—-

Earlier:

• Wharton finance professor says Fed could pause next week if NFP comes in hot

This article was written by Eamonn Sheridan at www.forexlive.com.

Capital Economics argues:

• “The outcome of the U.S. election won’t have a sizeable impact on most commodity prices over the next few months,”
• “Instead, differences between the candidates’ views on vehicle emissions, [liquified-natural-gas] exports and foreign-policy stance on Iran could affect oil and [natural-]gas prices over the next five years.”
• US oil and gas production climbed to record highs under President Joe Biden … Harris has not outlined any plans to regulate the sector more than Biden
• While perceptions are that Trump will try to remove subsidies for electric vehicles or weaken vehicle-emission standards, and thus lead to higher U.S. oil demand … Trump’s friendship with Tesla Inc. Chief Executive Elon Musk suggests that the “status quo may be maintained and that the U.S. vehicle fleet will steadily become more fuel efficient as electric- and hybrid-vehicles sales rise”

Link is here for more detail.

This article was written by Eamonn Sheridan at www.forexlive.com.

Mark Zandi is chief economist at Moody’s Analytics.

On the reasons for steeply rising interest rates he cites:

• strong economy
• higher tariffs, immigrant deportations, and deficit if Trump elected

***

Given the super-heated pre-election environment in the US Zandi has come under partisan attack.

I posted on him a few weeks back:

• US economy among the best performing in 35+ years”

In which I pulled out the warning to expect smaller/slower Fed cuts. Somehting which has indeed played out.

While I understand the partisan attacks I’ll just say that if you are taking your advice on the economy from politically-motivated partisans vs. qualified economists you do so at your own risk.

And yes, I am also aware there is a questioning and deep distrust of experts. Its probably reasonable to be distrustful of no-nothing morons also, no?

This article was written by Eamonn Sheridan at www.forexlive.com.

Japan economy minister Akazawa spoke late on Tuesday, ICYMI:

• weak yen can push up prices through higher import costs
• if wages are not rising as much, that would push down real household income, depress private consumption

Akazawa has been reading macro economic textbooks by the sound of it.

*

The yen has been pressured since the election, with the prospect of the Bank of Japan putting further rate hikes on hold. There appears to be some political pressure to do so:

• Japan DPP head says BOJ should avoid big policy change now b/c real wages standing still

Japan economy minister Akazawa

This article was written by Eamonn Sheridan at www.forexlive.com.

Australian dollar traders are preparing for significant moves in the currency this morning as the Australian Bureau of Statistics releases its latest key CPI data. The Reserve Bank of Australia has been the last major central bank to cut rates in the current cycle and has yet to pull the trigger, much to the frustration of Australian households and some politicians alike. The primary reason for this hesitation has been persistently high inflation. The market is pricing in a 0.3% increase in the crucial quarterly data, with the year-on-year figure expected to drop to 2.3%. Traders anticipate strong market movements if the data deviates from these expectations.

The Aussie dollar has been under pressure for the past four weeks since peaking in late September just below 0.6950. A combination of U.S. dollar strength and global uncertainty has contributed to pushing the ‘battler’ down by over 5%. It is now sitting at levels not seen since mid-August, and weaker numbers could raise hopes of a rate cut, potentially driving the dollar back toward annual lows. Stronger data could lead to a relief rally; however, given the current trend, most traders are likely to use any rally as an opportunity to sell and may prefer to buy the Aussie on the crosses.

Resistance Levels:

• Resistance 2: 0.6645 – 200-Day Moving Average
• Resistance 1: 0.6620 – Trendline Resistance

Support Levels:

• Support 1: 0.6543 – Overnight Low and Trendline Support
• Support 2: 0.6392 – Long-Term Trendline Support

The post Trade the Aussie Dollar on the Australian CPI Data first appeared on IC Markets | Official Blog.