Article by: ETO Markets
According to a study released on Wednesday by the Office for National Statistics in the United Kingdom, the Consumer Price Index showed a decrease in inflation from 3.4% in February to 3.2% in March. This reading above the 3.1% market expectation. In addition, the volatile food and energy prices are subtracted from the core CPI, which increased 4.2% during the same time vs the 4.1% increase predicted by analysts. In response to these readings, Pound Sterling gained momentum over its competitors.
Thursday's increase in the ASX 200 Index gives the Australian dollar more traction. Gains in mining firms, backed by stronger metals prices, underpin the local equities market. Furthermore, a Westpac analysis states that even if the Reserve Bank of Australia has said that rate increases are improbable, consideration of rate reductions would need to wait until there is more assurance regarding the inflation forecast.
The decline in the US Dollar Index is mostly attributable to lower US Treasury yields. The market's general risk-on attitude and fresh selling pressure serve to further support the US dollar's decline. Investors are keeping an eye on the weekly Initial Jobless Claims and Existing Home Sales data, which is expected to be released later on Thursday. These reports could offer further information about the US economy and have an effect on the direction of the US dollar.
The price of gold bounces back from its recent lows, trading on Thursday at about $2,370 per troy ounce. Amid increased geopolitical tensions in the Middle East, traders are becoming more cautious, which is helping the safe-haven yellow metal to gain ground.
The only factor driving the increase in bullion prices was the rising geopolitical unrest in the Middle East, where Israel is considering taking revenge on Iran for the latter's massive attack over the weekend. Meanwhile, US yields recovered their grin and moved up the curve, continuing to trade near the top of the previous range.
The 4-hour chart indicates that XAU/USD is entering a more extensive phase of consolidation, which looks to be limited by the $… level for the time being. The 50-SMA is now holding the downside. The Relative Strength Index is pointing slightly southward at 55, while the longer moving averages continue to retain their positive slopes well below the current spot levels. The immediate support is around $…, where the 50-SMA hovers around.
A number of Fed members made hawkish remarks that supported the US Dollar and drove down WTI prices denominated in USD. Fed Chair Jerome Powell stressed that he will hold off on cutting rates longer than anticipated in response to unexpectedly positive inflation data. He also added that the US central bank will probably need more time to become confident that inflation is approaching the Fed's 2% target before reducing borrowing costs.
Even while today's negative response points to a more substantial correction, the overall trend is still favorable. If there's confirmation below prior highs at $…, the bears will turn their attention to the $… region. Bulls should recover the $… mark to turn the market's attention back toward the YTD high, which is now at $...
