Gold Steadies Near 2-Week High

Analisi Giornaliera - 18/07/2017

Weakness in the US Dollar Continues to Support Bullion

Gold prices are holding ground near a two-week high on Tuesday, buoyed by softness in the US dollar. The greenback plunged to multi-month lows amid diminishing prospects of a further Federal Reserve interest rate hike before the end of the year.

Gold Logs Key Technical Breakout

The recent spate of soft US economic data has raised investor speculation that the Federal Reserve may be reluctant to lift interest rates any time soon. Yesterday’s rally in the yellow metal was fuelled by a weaker than expected reading of manufacturing in the New York-area, which retreated in July from a two-year high. The US dollar subsequently fell to its lowest level in 10 months against a basket of major currencies following the report.

A weaker greenback is bullish for gold as the dollar-denominated commodity becomes less expensive for investors holding in other currencies. XAUUSD was last seen around the $1238 per ounce-mark. The medium-term trend has turned bullish after bullion climbed above the technically important 200-day moving average on Monday. A convincing close above $1240 per troy ounce could unlock further upside for prices.

Inflation Slowdown Confirmed in Euro Area

In a widely-anticipated development, the headline inflation figure for the Euro Area slowed in June as the impact of the energy price rebound fades. The European Union's statistics office reported a 1.30% year over year increase for consumer prices in the 19-nation common currency area through the end of June, matching market forecasts after decelerating from 1.40% growth back in May.

The closely-watched core gauge of price growth, which excludes energy and unprocessed food, gained 1.20% on the year in June from 1.00% in May, topping market expectations of a 1.10% rise and the prior reading of 0.90%. Narrowing the figures down to a monthly basis, headline inflation stood at zero, while core inflation came in at 0.20% according to Eurostat. After rebounding moderately on Monday, EURGBP is trading flat on Tuesday, slipping just below 0.8800.

RBA Minutes Send Aussie Dollar to 2-year High

The Australian dollar surged to its highest level in over two years against the greenback after the Reserve Bank of Australia presented an upbeat assessment of the economy and discussed the prospect of a higher cash rate. Minutes from the July monetary policy meeting showed that sentiment was clearly upbeat, with the word "positive" repeatedly making an appearance in the five-page statement.

The Central Bank said that an improvement in infrastructure investment was likely to have a significant spill-over effect on other parts of the economy. The recent run of strong jobs reports was also encouraging, the minutes showed, with members noting that the pickup in labour fundamentals had eliminated some of the downside risks to the bank's projection of wage growth. The brief pullback in AUDUSD on Monday has since given way to further gains, with AUDUSD rallying above 0.7900 ahead of the European open.

Foreign Investment in Canadian Securities Soar

Since the outset of the year, foreign investors have picked up CAD 100.60 billion in Canadian securities, topping the CAD 82.00 billion recorded during the same period last year. Foreign investors increased their purchases of Canadian securities in May, ramping up holdings of Canadian equities and government debt. Data from Statistics Canada released on Monday showed that overseas investors acquired a net CAD 29.50 billion ($23.30 billion) in Canadian securities in May, the second highest level on record.

Overall, the May transactions resulted in a net inflow of CAD 25.09 billion into the country. However, when considering Canada has been operating with a sizable current-account deficit, the money from abroad is helping finance its investment and consumption growth. A brief US dollar rally on Monday has given way to losses, with USDCAD is tumbling early Tuesday to strong support near 1.2640.