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MTrading Team • 2023-02-17

Gold drops to multi-day low as US Dollar rallies on hawkish Fed calls

Gold drops to multi-day low as US Dollar rallies on hawkish Fed calls

Global markets turned risk aversion on Thursday, extending the sentiment on early Friday, as upbeat US data and hawkish Federal Reserve (Fed) talks propel fears of aggressive rate hikes by the US central bank. Adding strength to the risk-off mood could be the China-linked headlines and fresh pessimism surrounding Eurozone and the UK economies.

The downbeat risk profile and optimism about witnessing one more wave of monetary policy divergence between the Fed and the rest of the major central banks propelled the US Treasury bond yields and the US Dollar. The same bias drowned prices of Gold, Crude Oil and Antipodeans. 

Among them, USDJPY is the biggest loser versus the US Dollar while Brent Oil leads the commodity bears, followed by the Gold price. Further, equities also saw the red while cryptocurrencies offered a positive surprise.

Following are the latest moves of the key assets:

  • Brent oil drops nearly 1.0% at bears poke 50-DMA surrounding $83.60.
  • Gold renews six-week low at around $1,820, down 0.80% by the press time.
  • USD Index rises half a percent during four-day uptrend as bulls poke January’s peak, around 104.50 at the latest.
  • Wall Street closed in the red and weighed on the equities in the Asia-Pacific region, as well as the shares in Europe and the UK.
  • BTCUSD and ETHUSD surprise markets with mild gains around $23,600 and $1,650 as we write.
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It’s all about Fed 

With the last round of US data dump before the next week’s Fed Minutes also flashing mostly positive details about inflation and employment, not to forget the US activities, the concerns over the Federal Reserve’s policy pivot were strongly pushed back the previous day. Adding strength to the hawkish Fed calls were strong US Treasury bond yields that raised global recession fears and underpinned the USD Index rally towards a six-week top.

It should be noted that the improvement in the UK Retail Sales and Brexit hopes struggle with the bears amid broadly dovish views about Britain and the Bank of England’s (BoE) next move. Furthermore, the Reserve Bank of Australia’s (RBA) cautious optimism hints at a sooner end to the rate hike trajectory in Australia. On the same line were talks of an inflation peak in New Zealand which weighed on the NZDUSD. 

Elsewhere, fresh fears of the US-China tension offered extra strength to the bearish moves surrounding the AUDUSD and the NZDUSD.

That said, China’s status as one of the world’s biggest Gold consumers joins the strong US Dollar to please the bears of bullion and energy products.

Alternatively, BTCUSD and ETHUSD lick their wounds after reversing from multi-day high as chain matrices hint at a bullish bias of the crypto traders.

  • Strong buy: USDJPY
  • Strong sell: ETHUSD, GBPUSD
  • Buy: USD Index, USDCAD, Nasdaq, EURUSD
  • Sell: DAX, FTSE 100, gold, BTCUSD, AUDUSD

All eyes on FOMC Minutes

While the Fed concerns and China-linked fears keep the US Dollar on the front foot, a light calendar may allow the greenback bulls to take a breather during late Friday. Also, the cautious mood ahead of the next week’s FOMC Minutes and first readings of February activity data may add filters to the trading momentum.

May the trading luck be with you!