Little movement

Market report Michael Blumenroth – 26.01.2024

Weekly Market Report

Although the past week’s agenda included a number of central bank meetings, among them the ECB and those of Japan, Norway, Canada, and Turkey, financial markets have only seen rather modest fluctuation. Things might change in the coming week following the upcoming Fed meeting and the publication of various economic data, giving us an idea of how the financial markets might fare in the short term.

ECB: Interest rate turnaround in sight?

The week’s highlights: yesterday’ ECB meeting and fourth-quarter US GDP data. The ECB meeting itself was more or less a non-event, with no changes to monetary policy and the accompanying statements’ wording very similar to that of the December meeting. The press conference with ECB President Lagarde was more interesting, as she did not explicitly rule out a first interest rate cut in April in response to questions. On the financial futures markets, an interest rate turnaround on 11 April was therefore priced in as much more probable. Yields on European government bonds dropped noticeably, as did the euro.

In stark contrast to the weak sentiment indicators published over the course of the week from the eurozone and Germany in particular, US data has remained strong. Fourth quarter GDP rose significantly faster than previously expected by analysts. At the same time, the data confirmed that inflation had continued to fall in the fourth quarter, another reason why the euro is currently somewhat on the defensive against the US dollar.

Weekly gold price review

On Wednesday, yields on US government bonds reached their highest level since mid-December before falling back slightly yesterday. The impact of the bond markets on the gold price was therefore minimal this week. Last Friday, gold traded at 2,026 US$ per ounce in the morning before rising to 2,039 in the afternoon. By and large, it then traded sideways between 2,020 and 2,030 until Wednesday, when unexpectedly good US economic data put it under some pressure. After hitting a weekly low of 2,010 yesterday afternoon, however, it recovered somewhat and was trading at 2,021 US$ per ounce at the start of trading today.

Xetra-Gold initially strengthened from 59.90 € per gram on Friday morning last week to 60.20 on Friday afternoon. It dropped to a weekly low of 59.35 on Wednesday, but then recovered somewhat due to the weaker euro. This morning, it was expected to kick off trading quite a bit higher at around 60.10 € per gram.

Various important data is scheduled for publication in the week ahead. In addition to central banks’ interest rate decisions in the US (Wednesday) and the UK (Thursday), inflation data from the eurozone on Thursday and the labour market report from the US on Friday are likely to set the tone for the markets.  

I wish all readers a relaxing, sunny weekend.

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