GOLD
Gold prices traded flat early Tuesday after losing more than 1% during the previous session. The price of bullion is inversely correlated with the US dollar, and with the release of the American producer price index today and the consumer price index tomorrow, the markets are showing a bias toward the US dollar. Higher-than-expected inflation readings during the first quarter of the year led to a scaling back of bets on interest rate cuts by the Fed, which ended up capping the upside for gold prices. With US inflation and the Federal Reserve’s monetary policy once again taking centre stage, gold traders will be paying close attention. If inflation again surprises to the upside, bets on Fed rate cuts will be reduced, likely causing treasury yields to rise and the dollar to strengthen—a scenario that bodes poorly for the price of the non-yielding precious metal.
Ricardo Evangelista – Senior Analyst, ActivTrades
Source: ActivTrader
EUROPEAN SHARES
Markets were little changed in Europe on Tuesday, and the calm prevailed ahead of macro data seen as crucial by traders and analysts. Market operators are anxiously awaiting a slew of economic data this week, focusing on US inflation, that will likely impact market sentiment across a wide range of assets. Inflation data from Spain and Germany came as expected this morning, which didn’t lead to any significant price action on Eurozone benchmarks.
The UK’s FTSE-100 index climbed higher after traders welcomed another series of encouraging data showing salaries were growing more than estimated, boosting market sentiment in the region. Before tomorrow’s highly awaited US CPI report, investors will likely focus on today’s US PPI data, another gauge of the price pressure, coming alongside speeches from Fed officials. Today’s PPI data, a leading indicator of consumer price inflation, is expected to rise from 0.2% to 0.3%, boosting appetite for the US dollar while putting pressure on equities.
Meanwhile, Fed Chairman Powell’s speech should also lead to higher market volatility as investors will try to gather as many hints as possible regarding the likely outlook for monetary policy to lift some of the lingering uncertainty. The STOXX-50 still trades above the 5,045pts support level, with lower volumes than usual, as the market keeps consolidating close to an historical high level.
Pierre Veyret – Technical analyst, ActivTrades
Source: ActivTrader
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