Daily Market Analysis

Gold and Oil on the Ascent as Traders Eye Upcoming NFP

April 5, 2023

Gold and oil have been the star performersof the week so far, with both being on the ascent against the backdrop of aweakening USD. Gold has again taken another leap higher with the spot pricesettling comfortably above the US$2000 level while oil is managing to hold ontoits OPEC-inspired gains. In the case of gold, its appearing to be an ‘asset forall seasons’ at the moment because not only is it still seeing buying flows aspart of inflation-hedging, but it is also rallying during risk-on sessions asthe USD slides lower.

But what is actually happening with theUSD? The greenback has been facing some substantial headwinds in recent times,not just from a dovish turn from the FOMC but also from what appears to be agrowing move by some major economies to settle trade matters in a currencyother than the USD. As a result, the USD is losing some lustre of late and thelikes of not only gold and oil but also the Euro and Sterling have been able togain some solid upside momentum against the Dollar.

The Australian Dollar was in consolidationmode today after what has so far been quite a fruitful week for the currency.Rising commodity prices combined with a feeling that the RBA is not done withrate rises has seen the AUDUSD hold around the US$0.6750 as we await key USjobs data later in the week. While there was some relief on Tuesday inAustralia that the RBA took a pause after 10 consecutive rate hikes, RBAGovernor Lowe today reminded us that they are probably not at the terminalinterest rate setting yet.

Elsewhere, the RBNZ showed it was marchingto beat of its own drum by ramping up rates by 50bp, twice the amount that themarket was expecting. This gave the kiwi dollar a leg up today with the currencyclimbing over half a cent (and was last seen trading around US$0.6350). Thesignal sent to markets today was that clearly the RBNZ is not messing aboutwhen it comes to the goal of tackling inflation, and the kiwi dollar reactedaccordingly.

Across Asian bourses today we saw mixed performances after Wall Street ended its winning streak. I expect we could seea more cautious turn and perhaps some position tightening from markets overcoming sessions as we head towards Friday’s jobs data (Non-Farm Payrolls) inthe US. Right now the market is awaiting clues as to whether there is another 25bpof tightening to come from the Fed, and the state of the US labour market couldhave a big say in whether we will see another quarter point tightening from theFed in the coming months.

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