- Dollar and yields up, gold and silver down
- But will there be another twist as US investors come back to their desks after a long weekend?
- BOC and ECB policy decisions this week
- RBA kept policy unchanged overnight, and eurozone data disappointed
After the long weekend break for US investors, the US dollar has made back its losses suffered in response to a weaker employment report we saw on Friday. Treasury yields have also moved higher, pushing gold and silver lower. There hasn’t been much in the way of any major changes in macro data to cause the reversal. So, will it be a day of two halves? Will US investors come back from long-weekend break and resume selling the dollar and buying foreign currencies and gold?
Both precious metals were testing some key levels of support at the time of writing, with gold trying to form a base around that pivotal $1810 area where it had previously found resistance, while silver was testing THIS key support zone around $24.20:
Source: ThinkMarkets and TradingView.com
With the recent trend for silver being bullish, I wouldn’t be surprised if dip buyers step here and drive the metal back higher towards $25.00.
In term of macro data, we don’t have much to look forward to in the afternoon. We have already seen some mixed bag data out of the Eurozone today, with German ZEW disappointing expectations and causing the euro to weaken slightly. Here’s today’s data recap:
- German ZEW survey current conditions 31.9 vs 34.0 expected
- German ZEW Economic Sentiment 26.5 vs. 30.2 expected and 40.4 last
- German Industrial Production 1.0% m/m as expected
- Eurozone Q2 final GDP +2.2% vs +2.0% q/q second estimate
- RBA kept policy unchanged overnight as expected
Looking ahead, the Canadian dollar and the euro will be in sharper focus ahead of and in the aftermath of the BoC and ECB meetings later in the week. Both central banks are expected to keep their respective policy stances unchanged.
- BOC (Wednesday): In Canada, the upcoming federal election means the BoC won’t be making any changes, but the USD/CAD could decline further as the BoC is likely to remain comparatively hawkish, and in light of the renewed strength in crude oil prices.
- ECB (Thursday): As far as the ECB is concerned, well I can’t image President Christine Lagarde will have changed her dovish stance much, even as some ECB members have spoken in favour of ending PEPP in early 2022 amid the strength in Eurozone data. Still, any slightly change in her tone should keep the euro’s recent strength intact.
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