US core CPI inflation holding at 1.8%
Dollar defensive against most currencies
Gold was able to make strong bullish gains up to $1328/ounce
Friday’s non-farm payrolls did show higher than anticipated US job gains for the month of February, but subdued wage inflation meant that overall, economic data failed to move the dial in favour of faster rate hikes. With the rate of US core CPI inflation holding at 1.8%, the likelihood of more than three FED rate rises in 2018 has become unlikely, turning the dollar defensive against most currencies. Despite Draghi putting a dovish spin on the ECB’s decision to drop its easing bias in last week’s meeting, the Euro still succeeded in crawling up 0.2% against the dollar. However, with Trump’s new secretary of state Mike Pompeo, seen by investors as more hawkish than his predecessor Tillerson, traders may have jumped the gun when hedging against the dollar.
The Sterling started the week on firmer footing, supported by renewed optimism over ongoing Brexit negotiations. It was up 0.5% against the greenback.
Against the Japanese Yen, which tends to perform well when markets are anxious, the dollar was up 0.1%. Controversy between two key Japanese political figures Shinzo Abe and Finance Minister Taro Aso may be offsetting the dollar bears.
The precious metal flourished today after a Cronyism scandal between Japanese PM Shinzo Abe and his close ally Finance Minister Taro Aso emerged. With US equities struggling to stay afloat and the dollar weakening, Gold was able to make strong bullish gains up to $1328/ounce. However, the Whitehouse’s new Secretary of State coupled with tomorrow’s USD retail sales release could make the tide turn in favour of the hawks, which could potentially add severe headwinds to Gold’s bullish rally.
A surge in American shale oil output, reduced Oil’s relative competitiveness causing traders to turn bearish. Investors further compounded the move towards the downside due to a pullback in US equity markets, reducing the demand for Oil. Overall, WTI Crude Oil was down 1.3% over the day.