Gold Price Hits a Three-Month High; GBP Outlook Remains Bearish
Octa | Oct 20, 2023 05:55AM ET
On Thursday, the Russian rouble (RUB) was the best-performing currency among the 20 global currencies we track, while the Indonesian rupiah (IDR) showed the weakest results. The Swiss franc (CHF) was the leader among majors, while the US dollar underperformed.
Gold (XAU) rose for the third consecutive day on Thursday, driven by the ongoing Middle East tensions and the anticipation that the Federal Reserve's (Fed) rate-hiking cycle may end soon.
While gold has gained due to the war, buying exhaustion is fairly imminent,' said Daniel Ghali, the commodity strategist at TD Securities. Indeed, XAU/USD has approached a strong resistance level near 1,980, which might encourage some bulls to take profits. Apart from that, there are no reasons to be explicitly bearish on gold as fundamental pressure remains predominantly bullish. Tensions in the Middle East are fuelling safe-haven demand, while the Fed is signaling a cautious approach to the U.S. monetary policy. In his latest speech, Fed Chair Jerome Powell emphasized the importance of the recent tightening of financial conditions and highlighted risks caused by geopolitical tensions. Still, he noted that inflation hasn't cooled down to the Fed's target level. Nevertheless, the market currently prices in only a 20% probability of another rate increase this year, according to the CME's FedWatch Tool.
XAU/USD was rising during the Asian and early European sessions. Investors should closely monitor the developments in the Middle East. 'Spot gold is expected to extend gains into a range of 1,998–2,010 USD per ounce, as it has broken a resistance at 1,972,' said Reuters analyst Wang Tao. Overall, there is no news that could trigger high volatility in XAU/USD in the near future.
h2 The Outlook for GBP Remains Bearish/h2The British pound (GBP) was essentially unchanged on Thursday, but the trading session was quite volatile.
GBP/USD has decreased by almost 2% over the past two weeks as the U.K. macroeconomic data highlighted high inflation and a struggling jobs market. Moreover, traders turned risk-averse due to Middle East tensions. 'Sterling has been trading with its typical high beta to global risk conditions in recent days,' said Nicholas Rees, the FX market analyst at Monex Europe. In addition, traders worry that the Middle East crisis might lead to a sharp rise in energy prices, which will be a major problem for oil-importing countries like the U.K.
Get The News You Want
GBP/USD was relatively flat during the Asian session but fell sharply in the early European session after the worse-than-expected Retail Sales report. Retail sales declined by 0.9% in September, showing a much deeper decline than the forecasted 0.2%. The data may prompt the Bank of England (BOE) to adopt a less hawkish approach to the monetary policy. Indeed, in his latest interview, the BOE governor Andrew Bailey said that he expects to see a 'noticeable drop' in October's headline inflation figures, suggesting that he will be less likely to continue lifting the rates.
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.