Markets await US inflation data, UK GDP & BoC
Gold => The commodity falls to a 2022 low
FTSE => The index falls below 7200
USD/CAD => The pair holds steady over 1.30
Gold falls ahead of CPI data
Gold fell 0.43% yesterday in its second straight day of losses on USD strength and as investors looked ahead to the release of US inflation data.
The consumer price index (CPI) is expected to rise again in June to a new 40-year high. However, core inflation which excludes more volatile items such as food and fuel is expected to fall for a third straight month. Hot headline inflation will heap pressure on the Federal Reserve to raise interest rates aggressively.
The market currently is pricing in a 91% chance of a 0.75% hike and a 9% chance of a 1% hike. Higher interest rates are bad news for non-yielding gold, and so high inflation could see the precious metal slip towards $1700.
| US CPI YoY June | Expected: 8.8% (0.2%) | Previous: 8.6% |
Where next for Gold?
Gold broke out of a triangle pattern, taking out support at 1790, and is testing the September low.
The 50 sma crossed below the 200 sma in a death cross formation, suggesting further downside. However, the RSI has moved deeply into oversold territory, so caution should be applied to taking out larger sell positions.
Sellers will look for a move below 1722, the September low, to bring 1680, the August low, into focus. Meanwhile, buyers would look for a move over 1887 to expose falling trendline resistance at 1805 and the 50 sma at 1828.
It would take a move over the 200 sma to 1846 for buyers to gain traction.
FTSE falls with GDP in focus
After a weaker start, the FTSE closed 0.18% higher yesterday, shrugging off recession fears and falling commodity prices.
The UK index will now turn to GDP data for further clues on risk sentiment. The UK economy is expected to show that growth stalled in May after contracting in March and April.
The UK economy is stagnant, inflation is expected to continue rising, and now the ongoing political uncertainty following Boris Johnson’s resignation means that the UK economy is likely to be in LIMBO until after the summer.
| UK GDP MoM May | Expected: 0% (0.3%) | Previous: -0.3% |
USD/CAD awaits BoC rate decision
USD/CAD rose 0.1% yesterday as the USD extended gains for a third straight session, and CAD fell as oil prices tumbled. Oil fell 8% to $95 as recession fears and rising China COVID cases dragged on the demand outlook.
Today all eyes are on the BoC, which is expected to raise interest rates by 75 basis points to 2.25% to tame surging inflation. However, the slower jobs growth in June could prompt the central bank to tone down its hawkish rhetoric going forwards.
A less hawkish tone could drag the loonie lower, lifting the pair to fresh 2022 highs if US inflation data also shows consumer prices are rising,
Support can be found at 1.2940 (weekly low) and 1.29 (8 March low).
Resistance for the pair can be seen at 1.3080 (2022 high) and 1.31 (round number).
