Daily Market Digest: Gold hits $1300

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It was a quiet trading day but the trends persisted with Gold touching January 2015 highs of $1300 while EURUSD was short a few pips at 1.150. Yen remained stronger on the day.

Today’s Economic events

  • Australia AIG manufacturing index 53.4 vs. 58.1 previously
  • Australia MI inflation gauge m/m 0.10% vs. 0.0% previously
  • Australia NAB business confidence 5 vs. 6
  • Japan final manufacturing PMI 48.2 vs. 48.0
  • Australia commodity prices y/y -9.40% vs. -15.60% previously
  • Switzerland retail sales y/y -1.30% vs. 0.30%
  • Spain manufacturing PMI 53.5 vs. 53.0
  • Switzerland manufacturing PMI 54.7 vs. 53.7
  • Italy manufacturing PMI 53.9 vs. 54.1
  • French final manufacturing PMI 48.0 vs. 48.3
  • Germany final manufacturing PMI 51.8 vs. 51.9
  • Eurozone final manufacturing PMI 51.7 vs. 51.5

Coming up

  • Canada RBC Manufacturing PMI
  • US Final manufacturing PMI
  • ECB President Draghi speech
  • US ISM manufacturing PMI
  • US construction spending
  • IS Manufacturing prices
  • SNB Chairman Thomas Jordan speech

Gold extends gains, trades near $1300

Gold prices continued to keep up the bullish momentum going, extending Friday’s 2.20% gains to briefly hit $1300 mark, last seen in January 2015. On a year to date basis, Gold prices have rallied an impressive 22% this year in one of the strongest rallies in recent times. Following a weak US dollar on Friday, gold prices alongside other USD crosses surged higher on the day, despite lack of any clear fundamentals in the early part of the trading session. The gains in silver prices were more limited, rising 0.18% on the day at the time of writing but prices hit a 16-month high at $17.88 an ounce briefly in mid European trading session. On a year to date basis, Silver prices have gained over 28%, trading near January 2015 highs.

US names Japan and four other countries in currency report

The yen continued to surge higher in a slow trading day with the Japanese stocks falling sharply. The Nikkei Stock Average fell 3.10% after the Bank of Japan left monetary policy unchanged, despite slowing inflation and weak growth and falling short of market expectations of increasing its asset purchases. The lack of inaction to stem the yen’s appreciation has put many speculators to stay long on the yen. Over the weekend, US Treasury Department, in its semi-annual report to Congress, named five countries, Japan, China, South Korea, Germany and Taiwan for relying on policies to weaken their respective currencies and make exports more attractive. The treasury report said that it was damaging the US and the global economy.

However, Japan’s finance minister brushed aside the reports noting that Tokyo would not be constrained by the currency report. However, analysts disagree noting that continued Fx intervention could result in punitive actions from Washington kicking in, which could only encourage JPY bulls further..

US ISM manufacturing data eyed

Investors will be looking to the April’s ISM manufacturing report due for release at 1400 GMT. Analysts forecast the manufacturing PMI to slip to 51.6, against 51.8 increase in March, which showed an expansion in the sector for the first time in 9-months. A slip on the data is likely to keep the US dollar weaker across the board. However, Mario Draghi is scheduled to speak at the same time at an event in Frankfurt. With EURUSD trading near the $1.150 handle, any dovish comments on the EURUSD could spell a strong downside risks, but at the same time lack of any verbal rhetoric could keep the euro bulls going making 1.150 handle an easy target to achieve. Swiss National Bank Chairman, Thomas Jordan will also be speaking later in the evening.

USD/JPY could fall to 100 by early next year

Analysts at Mizuho bank expect further yen strengthening to continue noting that USDJPY could fall to the 100 mark by early next year. Underlining that the yen could weak in the near term as speculative position reaches historic highs, Mizuho Bank chief market economist Daisuke Karakama notes that USDJPY could range near 105 – 113 in May and June. However, a weaker dollar is an adjustment that is needed to stabilize the US economy, which in turn could weigh on the yen. Karakam expects USDJPY to range between 103 – 111 in July – September this year and 100 – 108 by October – December and 98 – 103 range by Q1 2017.


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