Gold prices have adjusted downward following a significant rise, influenced by profit-taking activities and a more optimistic market sentiment. Nevertheless, uncertainty regarding US tariff policies and expectations of interest rate cuts by the Federal Reserve continue to bolster demand for Gold as a safe-haven asset. Meanwhile, the release of UK inflation data today has the potential to trigger substantial movement in the British Pound (GBP), with inflation numbers higher than anticipated possibly pressuring the Bank of England (BoE) to adjust interest rates, which could weaken the GBP.
Here is the data from Trading Central:
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UK Year-on-Year Inflation JAN; forecast 2.7% vs previous 2.5%.
GOLD
Gold (XAUUSD) prices experienced a slight decline during the Asian session on Wednesday, following a sharp increase the previous day that brought prices close to all-time highs. This decrease is primarily attributed to profit-taking amid positive market sentiment, which lowered demand for Gold as a safe asset. However, uncertainty surrounding President Trump’s tariff policies may still support Gold prices.
Additionally, despite expectations for the Federal Reserve (Fed) to potentially cut interest rates further following an unexpected drop in US retail sales, the US Dollar has softened. This situation has helped limit the decline in Gold prices. The movement of Gold remains likely to be volatile with a downward tendency as traders may wait for the FOMC meeting minutes for further insights into interest rate policy before deciding on investments in Gold, which does not yield returns.
OIL
Oil prices traded around $71.90 during the Asian morning session today, continuing a rally due to concerns over supply disruptions in Russia. Ukrainian drone attacks on a key Russian pipeline pumping station have reduced oil flows from Kazakhstan by 30-40%, which is expected to cut global supply by about 380,000 barrels per day, potentially driving prices up this afternoon.
However, worries about President Trump’s tariff policies and potential trade wars may limit further increases in Oil prices. While supply disruptions support prices, uncertainty regarding global trade policies remains a significant hurdle.
EURUSD
The EURUSD currency pair saw a moderate rise toward 1.0450 this morning, triggered by a weakening US Dollar (USD). However, concerns about tariff policies and ongoing tensions between Russia and Ukraine could bolster the US Dollar, regarded as a safe-haven currency, limiting potential further gains for this currency pair.
President Trump’s statement on Tuesday night regarding a potential imposition of 25% tariffs on imports of cars, semiconductors, and pharmaceuticals adds to market uncertainty. The official announcement of these tariffs is expected to be released no earlier than April 2, which may trigger volatility in EURUSD trading.
GBPUSD
UK inflation data set to be released at 14:00 WIB today may induce significant movement in the British Pound (GBP), particularly given that higher than expected inflation could affect the Bank of England’s (BoE) interest rate decisions. If January’s inflation figures exceed the predicted 2.7%, this could exert pressure on the BoE to adjust their monetary policy, particularly concerning potential interest rate cuts. Such a move could weaken the GBP as the market would perceive a likelier dovish stance from the central bank.
Core inflation, expected to rise to 3.6% YoY in January, may also amplify concerns over the continuous rise in living costs in the UK. Should the inflation data come in higher than expected, the BoE may consider more aggressive actions to control inflation, which could exacerbate GBPUSD volatility. Conversely, if inflation is below expectations or remains stable, the GBP may receive a boost as the market might believe the BoE will adopt a more cautious approach regarding rate cuts.
USDJPY
The USDJPY pair is trending downward as the Japanese Yen (JPY) attracted buyers again during the Asian session on Wednesday, partially correcting previous declines against the US Dollar. Increased expectations that the Bank of Japan (BoJ) will raise interest rates amid widespread inflation pressures in Japan are supporting the JPY. Moreover, rising Japanese bond yields due to hawkish expectations from the BoJ are narrowing the interest rate gap between Japan and other countries, further driving fund flows into the JPY.
Simultaneously, expectations of interest rate cuts by the Federal Reserve are exerting pressure on the US Dollar, thereby adding downward pressure on the USDJPY pair. This scenario still has the potential to push USDJPY lower into the European afternoon session.
NASDAQ
The Nasdaq managed to maintain its gains during the Asian session, driven by overall resilience in the stock market despite concerns regarding high inflation and President Trump’s trade policies. Although some stocks, such as Arista Networks and Bumble, faced declines post-trading session, the Nasdaq index still recorded a slight increase. This reflects investor optimism towards the continuously growing technology sector.
Despite facing negative pressures from tariff and inflation sentiments, the stock market, including the Nasdaq, continues to exhibit resilience as investors tend to overlook these factors while seeking opportunities in technology stocks and other sectors with bright prospects.
