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Fresh Fed Rate Hike Expectations
A resurgence in hawkish Fed expectations for the June meeting and beyond has fuelled a sharp rally in USD over the last week. On the back of last week’s FOMC minutes, market pricing for a further hike in June has jumped to above 60%. This marks a significant shift in sentiment given that pricing was sitting below the 10% level around the middle of the month. The shift comes on the back of a slew of hawkish Fed commentary recently, some stronger-than-forecast data and last week’s FOMC minutes which revealed a hawkish slant to discussions. Additionally, progress within the US debt ceiling negotiations looks to also be supporting the prospect of a further hike.
US Debt Ceiling Negotiations
The two sides reportedly have an agreement in principle which will now need to be passed through both Congress in order to be confirmed. While such a deal will avoid an historic US debt default, there have been concerns raised over the level of debt the US government will have. Nonetheless, with stocks set to rise on a deal, the ground is laid for the Fed to hike rates further as a means of helping curb any inflationary response which might materialise. Gold prices have come under heavy selling pressure as a result of the uptick in USD and look poised for further losses should USD gains continue across the week.
Technical Views
XAUUSD
The sell-off in gold prices has seen the market falling sharply from the highs around 2069.41. Price is now testing the bull channel lows having broken beneath support at the 1973.51 level. With momentum studies bearish, the focus is on a break lower with 1871.04 the next big support if we do slide from here.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.