Australia’s TD-MI inflation gauge rose to 3.6% in January, slightly up from 3.5%. Meanwhile, OPEC+ decided to maintain oil production levels for March, and members of the BOJ expect more rate hikes if forecasts hold true. The EUR/USD pair reached a multi-year high of 1.2082 before dropping back to around 1.1900. The US Dollar initially weakened as speculation arose about potential US intervention in the Japanese Yen.

GBP/USD and Gold Prices

GBP/USD climbed to a four-year high above 1.3850 due to selling pressure on the US Dollar and a technical Golden Cross suggesting more gains ahead. Gold prices fell to about $4,780 as signs of US political stability emerged, and traders awaited the US ISM Manufacturing PMI report. Global central banks mostly kept their policy rates steady. The Eurozone’s strong GDP growth supports the ECB’s choice to maintain rates. Meanwhile, Bitcoin, Ethereum, and Ripple saw corrections with weekly losses of roughly 6%, 3%, and 5%. The cryptocurrency market is on a downward trend, with Bitcoin nearing its November lows at $80,000, and Ethereum dropping below $2,800. Next week’s markets will depend on possible Fed nominations and central bank meetings, where surprises could occur. Our immediate focus is on the recovering US Dollar, which is expected to continue its rally. If a hawkish Fed leads the way, higher interest rates are likely, which usually strengthens the dollar. This is reminiscent of the last major tightening cycle in 2022 when the Dollar Index (DXY) jumped over 15% to reach two-decade highs.

Gold Traders’ Outlook

Gold traders should be very cautious following the drop from the $4,800 peak. As the dollar gains strength and real yields are expected to rise, the attractiveness of non-yielding gold declines significantly. We see put options or short futures on XAU/USD as a potential strategy to hedge against or profit from a further correction towards the $4,500 level. The EUR/USD has struggled to maintain gains above the 1.20 level, indicating a strong reversal. This opens up clear opportunities since the policy paths between a hawkish Fed and a steady European Central Bank are diverging. The economic slowdown observed in late 2023, where Eurozone GDP stagnated at 0.0% growth, appears to be a persistent factor limiting the euro’s performance. On the other hand, the British Pound shows relative strength, creating a volatile trading environment against the strong dollar. The “Golden Cross” on GBP/USD indicates technical bullishness, but the fundamental strength of the dollar poses a challenge. We expect notable price fluctuations around the upcoming Bank of England meeting, making options strategies that benefit from volatility, such as straddles, more attractive than simple directional bets. Despite a slight increase in domestic inflation to 3.6%, the Australian Dollar is likely to feel pressure. The RBA is expected to lag behind the Fed’s potential hawkish moves, and a strong US dollar usually weighs down commodity currencies. This difference in central bank policy is likely to push the AUD/USD pair lower in the upcoming weeks. Create your live VT Markets account and start trading now.

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