Bailey speech: Will not comment on Conservative leadership candidates' plans

 

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Bank of England (BoE) Governor Andrew Bailey is delivering his remarks on the policy outlook and responding to questions from the press following the bank's decision to hike the policy rate by 50 basis points to 1.75%.

Key takeaways

"BOE will not comment on Conservative leadership candidates' plans."

"BOE has a very clear mandate of price stability."

"Consequences of Russia's actions in Ukraine have a serious economic impact."

"Political pressures have been very well managed since BOE independence."

"I have not abandoned the narrow path analogy for UK policy outlook."

"A number of central banks have a similar narrow path to tread."

About Andrew Bailey (via bankofengland.co.uk)

"Andrew Bailey previously held the role of Deputy Governor, Prudential Regulation and CEO of the PRA from 1 April 2013. While retaining his role as Executive Director of the Bank, Andrew joined the Financial Services Authority in April 2011 as Deputy Head of the Prudential Business Unit and Director of UK Banks and Building Societies. In July 2012, Andrew became Managing Director of the Prudential Business Unit, with responsibility for the prudential supervision of banks, investment banks and insurance companies. Andrew was appointed as a voting member of the interim Financial Policy Committee at its June 2012 meeting."

EUR/USD: Upside could be limited even on good news regarding gas supplies – Rabobank

  EUR/USD has come within a whisker of parity. How low the pair goes is likely to depend on whether or not Russia wants to worsen the economic war with Europe, economists at Rabobank report.

USD strength may not relent until next year

“From a fundamental perspective, it is not difficult to paint a scenario in which EUR/USD could break below 1.00 and hold at lower levels into the winter months. That has been the case for a while.”

“If the Nord Stream 1 natural gas pipeline is switched back on, in time next week after its scheduled maintenance, the EUR is likely to be granted a reprieve. That said, even if the EUR is boosted, we expect USD strength to dominate into next year suggesting upside for EUR/USD could be limited even on good news regarding Nord Stream.”

“For now, we retain our one-month forecast of EUR/USD 1.03. Evidence that Russian gas supplies into Europe will be further disrupted into the winter would cause us to downgrade our forecasts for the EUR further.”

Gold Price Forecast: XAUUSD closes in on $2,000 amid Easter Monday thin trading

 

• Gold Price remains poised to recapture $2,000 amid a flight to safety.
• Elevated inflation, recession risks and the Russia-Ukraine war boost safe-haven appeal.
• The speech from Fed Chair Jerome Powell will keep investors busy this week.

Easter Monday-induced thin market conditions are offering some extra zest to bulls, as Gold Price heads closer towards the $2,000 round level. The light trading seems to be exaggerating the moves in XAUUSD, as a 0.50% drop in the US stock futures reflects a risk-off market profile. Persistent Russian military actions in the Western Ukrainian city of Lviv and the Southern port city of Mariupol suggest that a peace agreement is nowhere in sight, fuelling anxiety. Meanwhile, the Ukraine crisis-led surging global inflation is prompting investors to seek refuge in the inflation-hedge Gold Price. Buyers ignore the notable strength in the US dollar alongside the Treasury yields, as a flight to safety makes the traditional store of value, gold, more appealing.

Also read: Gold Price Forecast: XAUUSD needs to crack this level to take on the $2,000 mark

Moreover, China’s covid lockdowns and a potential European Union (EU) embargo on Russian gas could likely intensify inflation and growth concerns. This was seen as another factor that boosted the metal's appeal as a hedge against rising costs. Investors will now focus on the speech from the St. Louis Fed President and FOMC member James Bullard, which will provide insights into the likely monetary policy action by the Fed. However, the mega event will be the speech from Fed Chair Jerome Powell due later this week.

“We are of the view that the Fed is broadly in-sync with the move toward the vicinity of neutral by the end of 2022, with Governor Brainard supporting that view recently. Chair Powell's remarks in an IMF panel on the global economy will get the focus of the attention,” analysts at TD Securities explained. “While the Fed is signalling its intent to reach neutrality by year-end, and to start an aggressive QT regime, outflows from gold markets have been scarce as participants are happy to retain some optionality against the Fed's stated plan amid growth concerns,” the analysts added.

Gold Technical Analysis

The bulls are in control and taking on fresh highs. On a daily scale, XAU/USD has tested the breakout of its previous critical level at March 24 high $1,966.18 multiple times. The 20- and 50-Exponential Moving Averages (EMAs) are scaling higher, adding to the upside filters. The momentum oscillator Relative Strength Index (RSI) (14) has overstepped 60.00, which indicates a firmer bullish momentum going forward.

 Euro gains respite from Macron's French election lead

The euro looked set to snap a seven-day losing streak versus the dollar on Monday, as the single currency rallied after French leader Emmanuel Macron beat far right challenger Marine Le Pen in the country's first round of presidential voting.

Investor concerns about the future direction of the euro zone's second-biggest economy have weighed on the euro and added to worries over the economic costs of war in Ukraine.

Meanwhile, the dollar has been pushed higher by rising U.S. yields and expectations the Federal Reserve will act quickly to stem inflation. One of the big fallers has been the Japanese yen, which fell to a fresh seven-year low versus the dollar.

Macron will face Le Pen in what promises to be a tightly fought French presidential election runoff on April 24.

Nonetheless, Macron's lead in the first round provided some respite for the euro - lifting it by as much as three quarters of a percent in Asian trading hours to $1.0955. It was last up 0.3% at $1.09080.

Currency analysts said the contest remained on a knife-edge with negative implications for the euro.

"The narrower than expected victory for President Macron will keep alive fears that there is an outside chance that Le Pen can become president," analysts at MUFG said in a note.

"The first-round results and the opinion polls pointing towards a close result in the second round will remain a modest weight on the euro in the coming weeks."

The dollar index - which tracks the greenback against a basket of six peers - was broadly flat on the day, just shy of the 100 mark hit last week for the first time in nearly two years.

As the dollar has gained ground, investors have seen little reason to exit bets against the yen while the Bank of Japan holds yields near zero.

The yen fell as much as 1% on the day to 125.55 yen per dollar, its lowest level since 2015.

"There's nothing there to frighten people out of dollar/yen positions," said National Australia Bank (OTC:NABZY)'s head of foreign exchange Ray Attrill. "So onwards and upwards for dollar/yen."

Sterling was broadly flat versus the dollar at $1.30380.

The Russian rouble weakened in jittery trade, reversing some of the previous week's gains, after the central bank decided to relax temporary capital control measures.

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