Forex Fundamental News Facts for 19th April, 2024

Forex Fundamental News Facts for 19th April, 2024

[Quick Facts]

1. Gold quickly rallies by $30 on rising risk aversion.
   2. Fed to cut rates in September and maybe once more this year.
   3. Fed’s Bostic is open to a rate hike if inflation progress stalls.
   4. Japan’s nationwide core CPI slowed to 2.6% in March.
   5. Williams indicates no urgency to cut rates and is open to a rate hike if needed.
   6. U.S. home sales fell in March while prices rose.
   7. Villeroy expects a rate cut in June, barring surprises, and is open to more rate cuts.
   8. Commodity Markets Perplexed Why Gold Keeps Going Up
   9. Oil Traders Sanguine About Risks from Israel-Iran Conflict

[News Details]

Gold and Oil Prices Surge:
After hearing explosions in Iran, Syria, and Iraq, people are worried that Israel might be attacking. This fear has caused gold prices to rise by almost $30, reaching $2,394.69 per ounce. U.S. crude oil prices also increased by more than $2 to $85.15 per barrel.

Federal Reserve Plans to Cut Rates:
A survey by Reuters shows that most economists believe the Federal Reserve will reduce the federal funds rate in September. Half of the economists surveyed think there will be two rate cuts this year.

Potential Rate Hike Due to Inflation:
Raphael Bostic, the President of the Atlanta Fed, says that if inflation slows down or moves away from the central bank’s 2% target, he would consider increasing rates. He currently thinks a rate cut will happen in late 2024.

Slow Growth in Japan’s Core CPI:
The Japanese government’s data shows that the nationwide core CPI increased by 2.6% compared to last year. A measure of price increases that doesn’t include fresh food and energy costs has slowed down to 2.9%.

No Rush to Cut Rates:
John Williams, the New York Fed President, says there’s no need to hurry to cut interest rates. He also says that he would consider raising rates if needed.

Decline in U.S. Home Sales:
U.S. home sales dropped in March because of rising interest rates and higher prices. The median price of existing homes rose 4.8% from last year to $393,500 in March, which is the highest price ever for that month.

Potential Rate Cut in June:
François Villeroy, a member of the European Central Bank Governing Council, expects a rate cut in June unless there are major shocks or surprises. He is also open to more rate cuts in the future.

Commodity Markets Perplexed Why Gold Keeps Going Up:
Gold Prices Break Records: Gold prices have risen by 20% in the last two months, reaching an all-time high of over $2400 per ounce. This is surprising because high real bond yields and a strong US dollar, which usually lower gold prices, are currently present.
Reasons for Gold’s Rise: Analysts believe that the increase in gold prices is due to central banks, especially in emerging markets, buying more gold and strong demand for gold in China and the US. The geopolitical risks in Europe and the Middle East have also made gold more attractive.
Gold’s Value: RBC Capital Markets thinks that while these factors are important, they are not usually the main things that determine gold’s price. Helima Croft from RBC suggests that gold might be overvalued and that we might need to change our expectations.
Gold as a Measure of Fear and Wealth: Goldman Sachs suggests that gold can be used as a measure of fear and wealth. They are more optimistic than RBC and predict that gold prices will average $2248 an ounce in 2024.
Gold’s Rally Might Slow Down: Oxford Economics warns that gold prices might fall in the short term. They believe that the rally has been supported by investment managers buying more gold, but they think this will slow down.
Goldman’s Forecast: Goldman Sachs has increased its end-of-year price forecast for gold to $2700 an ounce. They believe that the US Federal Reserve cutting rates later this year will reduce the amount of gold being sold by exchange-traded funds (ETFs).
Central Banks Buying Gold: Central banks have been buying a lot of gold, which has made up for the gold being sold by ETFs. Citi expects this trend to continue and predicts that central banks will buy more than 1000 tonnes of gold this year.
Citi’s Forecast: Citi has increased its 2024 gold price prediction to $2350 an ounce and its 2025 prediction to $2875 an ounce. They believe that if the Federal Reserve cuts interest rates and there is a rally in Treasuries, gold could reach $3000 an ounce in the next 12 months.
Gold Producers’ Valuations: Investors are wondering when the increase in gold prices will affect the valuations of gold producers. The VanEck Gold Miners ETF has not performed as well as the gold price, but it has started to catch up. UBS believes that if gold prices stay at their current levels, it could lead to a 20% increase in earnings for gold miners in 2024-25.
Impact of Cost Inflation: Wilsons Advisory agrees that the impact of the gold price will be greater than the impact of cost inflation in the medium term. They believe that this is not yet reflected in consensus earnings.

Oil Traders Sanguine About Risks from Israel-Iran Conflict:
Oil Prices Drop After Iran’s Attack on Israel: Despite expectations that oil prices would rise after Iran’s missile and drone attack on Israel, they have actually fallen. This is because oil prices are influenced by many factors, not just one.
Oil Market Conditions: The oil market currently has a good supply, with average inventories and plenty of unused production capacity. Traders believe that Iran won’t risk disrupting its exports, the US won’t risk higher oil prices in an election year, and the US will limit Israel’s responses.
Oil Inventories: Commercial inventories of crude oil and refined products were estimated at around 2,735 million barrels in March. These inventories are slightly below the average for the past 10 years. However, the market is slowly tightening, and there is enough inventory to handle short-term production interruptions.
Production Capacity: Saudi Arabia and other OPEC members in the Middle East had more than 4 million barrels per day of unused production capacity in March. This is the highest level since the coronavirus pandemic in 2020-2021 and the recession after the financial crisis in 2009-2011.
Production Growth: Production outside OPEC⁺ is expected to grow strongly this year, especially in the United States, Canada, Guyana, and Brazil. This growth should be enough to meet the increase in consumption in 2024.
Oil Prices and Spreads: Inflation-adjusted front-month Brent futures prices averaged $85 per barrel in March, which is in line with the long-term average since 2000. The futures market had already moved into an aggressive backwardation, meaning traders expected inventories to decrease further in the near term.
U.S. Oil Inventories: In the United States, the EIA publishes stock data with a delay of less than a week. Traders often use this high-frequency data on U.S. inventories as a proxy for the production-consumption balance in the global market.
Potential for Escalation: The cycle of retaliation between Iran and Israel could escalate to the point where it disrupts production and tanker traffic from Iran and other countries around the Gulf. However, traders are treating this as a less-likely risk, rather than a central scenario.
Risk of Production and Export Loss: The risk of a sudden loss of production and exports is not zero, but it’s also not high enough to require prices to rise sharply to restrain consumption, build even larger inventories, and create more spare capacity to mitigate it. Unless the threat to Gulf production and exports becomes more concrete, current prices and spreads look consistent with a market that is only moderately tighter than usual.

Sources :
– CNBC, Bloomberg, Reuters, Fastbull, Yahoo Finance, CNN, ForexFactory News, Myfxbook News etc

Prepared to you by “Akif Matin“

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