Market Week Ahead: Gold Regains $2k, GBP/USD, EUR/USD Rally as USD Slides
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Fed Stays Put, Sees Three Rate Cuts in 2024, Gold Prices Soar as Yields Plunge
The Federal Reserve is set to implement a series of interest rate cuts next week, according to the latest Fed ‘dot plot’, with three 25bp moves seen in 2024, as the US central bank acknowledges that economic growth is likely to weaken going forward. Financial markets however are pricing in a more aggressive set of rate cuts with six 25bp moves seen next, with the first cut expected in late March.
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In contrast to the Fed’s dovish pivot, the Bank of England and the European Central Bank both held their hawkish outlooks, despite prior expectations that both may gently ease back from their ongoing restrictive stance. Expectations of a series of rate cuts by both central banks next year were paired back but still point to much lower rates in 2024.
Hawkish BoE Leaves Rates Unchanged – GBP/USD Breaks Above 1.2700
ECB Keep Rates Steady with Tentative Inflation Downgrades. EUR/USD Rises
Equity markets continue to ride the wave of optimism with US indices hitting multi-year and all-time highs while in Europe the DAX printed a fresh all-time high. Positive risk sentiment continues to power the equity bull run although as we enter the final week before the Christmas/New Year break, volume turns sharply lower and risk appetite will likely wain.
There are quite a few high-impact economic data releases on the calendar next week with UK and US inflation reports and the Bank of Japan policy meeting the standouts.
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For all market-moving economic data and events, see the DailyFX Calendar
Technical and Fundamental Forecasts – w/c December 18th
British Pound Eyes Inflation and GDP Data – GBP/USD and EUR/GBP Forecasts
The Bank of England this week reiterated their battle against inflation is far from over, leaving Sterling propped up by higher-for-longer rate expectations.
Euro Forecast: EUR/GBP and EUR/JPY Face Support, EUR/USD to Rise?
A rather hawkish ECB statement probably sits somewhere between the BoE and the Dovish Fed, keeping the euro supported. What is likely to drive euro pairs next week?
Gold (XAU/USD)and Silver (XAG/USD) Jump on Dovish Fed Interest Rate Outlook
Gold and silver turned early losses into respectable gains at the end of the week, driven by a dovish Federal Reserve outlook for the coming year.
US Dollar in Peril with Core PCE on Deck, Setups on EUR/USD, GBP/USD, USD/JPY
The November U.S. PCE report will be key for the U.S. dollar in the short term. Weaker-than-expected numbers could reinforce the greenback’s recent decline, but strong numbers could trigger a bullish reversal.
All Articles Written by DailyFX Analysts and Strategists
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Breaking News: Gold Surges Past $2k, GBP/USD and EUR/USD Soar as USD Takes a Dive
Gold has had a remarkable surge in recent months, breaking through the $2,000 mark for the first time in history. Along with the rising value of gold, we are seeing a significant impact on currency exchange rates, particularly with the GBP/USD and EUR/USD pairs. This unprecedented movement in the market has caught the attention of investors and analysts worldwide. Let’s take a closer look at this breaking news and what it means for the global economy.
Gold Hits Record High of $2,000
On August 4th, 2020, the price of gold reached an all-time high of $2,030 per ounce. This surge in gold prices can be attributed to several factors, including economic uncertainty, a weak US dollar, and global stimulus measures. Investors are seeking a safe haven in gold, given the ongoing COVID-19 pandemic and its impact on the global economy.
Gold is typically considered a safe-haven asset as it holds its value well during economic downturns. As the COVID-19 crisis continues to wreak havoc on global markets, investors are turning to gold as a store of value. This increasing demand for gold has driven up its price, and analysts predict that this trend will continue in the coming months.
Impact on Currency Exchange Rates
The rise in the price of gold has also had a significant impact on currency exchange rates. The most notable changes have been seen in the GBP/USD and EUR/USD pairs.
GBP/USD Surges Past 1.31
In recent weeks, the British pound (GBP) has risen against the US dollar (USD), breaking through the 1.31 level for the first time since March 2020. This surge in the GBP/USD pair can be attributed to a combination of factors, including the weak US dollar and the strong performance of the UK economy.
With the COVID-19 crisis causing a sharp decline in the value of the US dollar, investors are turning to other currencies, including the GBP. Additionally, the UK economy has been showing promising signs of recovery, with retail sales rebounding in July and unemployment rates lower than expected. This has boosted confidence in the GBP and further increased its value against the USD.
EUR/USD Soars Above 1.18
The euro (EUR) has also seen a significant increase in value against the US dollar, surging past the 1.18 level for the first time since September 2018. The rise in the EUR/USD pair can be attributed to similar factors as the GBP/USD, including the weakening US dollar and a recovering European economy.
The European Union has also recently reached a landmark agreement on a €750 billion stimulus package, which has provided a significant confidence boost in the EUR. This, coupled with a weakening US dollar, has propelled the EUR/USD pair to new highs.
USD Takes a Dive Amidst Economic Uncertainty
While the rise in gold prices and currency exchange rates is certainly a notable development, it is essential to understand the underlying cause of these changes: economic uncertainty. The ongoing COVID-19 crisis has severely impacted the global economy, and many investors are looking for alternative ways to protect their wealth.
Even before the pandemic, there were concerns about the US economy, with rising levels of debt and a growing trade deficit. The uncertainty surrounding the upcoming US presidential election has only added to these concerns, causing many investors to lose confidence in the US dollar and seek alternative assets such as gold and other currencies.
What This Means for Investors
For investors, it is crucial to keep a close eye on these developments and adjust their investment strategies accordingly. With gold prices reaching record highs and currency exchange rates in flux, it may be an ideal time to diversify portfolios and consider alternative assets.
Investors with a diversified portfolio, including gold and other currencies, have likely seen significant gains in recent weeks. The key is to continue to monitor market movements and make informed decisions based on economic data and expert analysis.
In Conclusion
The recent surge in gold prices and the impact on currency exchange rates is breaking news that should not be ignored. This development is a clear sign of economic uncertainty, and investors must pay attention and adjust their strategies accordingly. With gold breaking through the $2,000 mark and currency exchange rates soaring, now is the time to keep a close eye on the market and make informed decisions to safeguard your wealth. Remember to always consult with a financial advisor before making any investment decisions and stay informed on current economic news.
