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Must Read Forex Updates for Jan 24th, 2023

Australian Dollar

Aussie Dollar Outlook

It is still possible that the Reserve Bank of Australia will raise interest rates again in February, as mentioned in their previous minutes. Money market prices are currently divided between a 0% increase and a 25bps increment, which could lead to more clarity on Wednesday’s inflation print. On a positive note for the Australian dollar,

commodity prices are projected to remain high throughout the year largely due to China reopening and coal exports being directed toward European countries who have become increasingly concerned about Russian energy sources.

US Rates Outlook

Financial market participants are betting that the U.S. Federal Reserve will reduce its interest rate increase cycle for a second consecutive meeting in February, according to new data. The dollar began Friday testing a fresh nine-month low against other major currencies, signaling growing hesitance among investors about further monetary stimulus from the Fed’s policies.

US Rates
Treasury

Officials from the Federal Reserve are currently in a “quiet period” leading up to their policy meeting on February 1st. However, according to recent reports, expectations have shifted toward an upcoming move of 25 basis points rather than 50 basis points as seen at the last meeting.

The recent string of weak economic indicators has led to speculation that the United States economy slowed drastically at the end of 2022. Despite strong unemployment rates and steadily increasing demand in the labor market, this trend is being evidenced by declining retail sales and industrial production figures.

 Gold Update

Gold prices rose overnight into resistance before retreating later in the session. However, despite low volumes, this hasn’t been accompanied by an increase in buying interest; we’re still seeing very little demand for gold at present. We think it’s possible that Gold could make a fresh high above $1,938 but we are cautionary about getting too excited until there is stronger evidence of increased investor activity. Ideally, we would see a breakout above 1938 with a significantly higher volume to confirm any such move.
Gold
Gold USD
 
Gold has been doing well relative to the US dollar given yields were up for three consecutive days. However, gold’s strength is also being driven by safe-haven flows related to a weaker United States economy and a less aggressive Federal Reserve tightening cycle. Note that put buying (to sell later) has slowed while prices have risen, indicating call buying (to buy now) outstripping put buying.
 
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