Gold holds above the prior high, hinting at a bullish continuation while FX markets look ahead to crucial Japanese wage data that comes just in time for next week’s BoJ meeting.
(AI Video Summary)
The focus on US inflation has been prominent while today’s reports on PPI and retail sales are not anticipated to have a significant impact. The trend of disinflation, or decreasing inflation, is strong and would require a series of higher inflation numbers to reverse this trend. Despite slightly higher CPI data earlier in the week, broad disinflation continues. Retail sales came in lower than expected, showing improvement from January but not as much as predicted.
For the rest of the day, there are no major events to look out for. However, several ECB speakers will share their thoughts on monetary policy following the dovish comments from the Greek Central Bank President Yannis Stournaras. Snow also discusses the dollar and notes that it would be difficult for bulls to chart a sustained move higher. The euro may be influenced by ECB comments, but the main focus is currently on gold and Bitcoin, as they are at or near all-time highs. Gold is showing signs of a potential bullish continuation, as long as the precious metal stays above the prior high.
Snow also mentions the June meeting for the Fed, which seems likely to be the next big interest rate development. He suggests that the US and Eurozone have different economic situations, which may lead to the ECB adjusting their monetary policy earlier than the Fed. In terms of oil prices, they are trading within an upward channel and have been bouncing off key levels positively. If Brent crude closes above a certain level, it would be a positive signal.
In terms of indices, European stocks are still on the rise, while US equities show no signs of reversing. This indicates a bullish continuation in the absence of evidence to the contrary. In Japan, the outcome of wage negotiations could impact whether the Bank of Japan raises interest rates out of negative territory. Wage increases have been demanded by labour unions, suggesting that wages are increasing, which is important for the Bank of Japan when making decisions about a potential exit from negative rates. Alongside the BoJ’s wage objectives, inflation is also required to remain above 2% in a stable and sustainable manner but the figure is heading lower, back towards the 2% target in recent months. As for the dollar-yen pair, it has experienced a pullback but hasn’t dropped below the 146.50 level. The wage data highlights the potential for increased volatility tomorrow across yen pairs.