Gold (XAU/USD) price registers solid gains of over 1.30% on Tuesday despite hawkish rhetoric from Federal Reserve (Fed) officials, after hitting a multi-week low near $4,110 on Monday. The XAU/USD pair trades at $4,170 after bouncing off daily lows of $4,113.
Tuesday's two Canadian catalysts, a flat July for the economy and a later start to Bank of Canada (BoC) bond buying, didn't move USD/CAD. The pair went above 1.4200 for the first time since early July and fell back twice.
New York Federal Reserve (Fed) President John Williams spoke at the University of Buffalo and said that “price stability is foundational for the economy,” adding that “determining how restrictive monetary policy is is hard.”
The US Dollar Index (DXY) extends gains on Tuesday, approaching its year-to-date high as expectations of further Federal Reserve (Fed) interest-rate hikes drive strong demand for the Greenback.
The New York Fed Governor John Williams said that he “sees no need for urgency after September rate hike,” a dovish statement that pushed the US Dollar Index (DXY) modestly lower, though it remains positive in the day.
Chicago Federal Reserve (Fed) President Austan Goolsbee, a voter in the Federal Open Market Committee (FOMC) in 2027, said Tuesday that “the fact that we have been 5 ½ years above inflation target is playing with fire,” adding that “massive deficits” can overheat the economy.
The US Dollar (USD) has accelerated its recovery, adding to the positive start to the week and clinching new multi-week tops, always helped by the persistent advance in US Treasury yields and unabated geopolitical concerns.
St. Louis Federal Reserve (Fed) President Alberto Musalem crossed the wires on Tuesday, saying that central bankers needn’t make promises but should tell the public how and why the central bank makes policy decisions.
Federal Reserve (Fed) Governor Michael Barr said Tuesday that he sees “elevated wage rates in the skilled trades,” and added that the resilience of the US economy is “striking.”
Silver (XAG/USD) retreats on Tuesday and trades around $60.75 at the time of writing, down 0.38% on the day.
Federal Reserve (Fed) Governor Michael Barr said on Tuesday that “there is a need to recalibrate policy” and that the base case is that “further policy adjustments” are likely needed.
Alexander DeMarco, the Governor of the Central Bank of Malta and member of the Governing Council of the European Central Bank (ECB), crossed the wires on Tuesday, saying that “stronger core inflation” could be a reason for the central bank to act, and that he supports a rate hike in October.
The Pound Sterling (GBP) drops some 0.38% against the US Dollar (USD) on Tuesday as the latter continues to appreciate, even though US Consumer Confidence deteriorated and jobs data confirmed the strength of the US labor market.
Bank of England (BoE) Monetary Policy Committee member Alan Taylor said on Tuesday that “monetary policy should not react mechanically to movements in energy prices,” though he recognized that if “pressure builds and second round effects” emerge, then the BoE should reassess monetary policy.
EUR/USD extends its decline on Tuesday, falling to its lowest level since late June as broad-based US Dollar (USD) strength keeps the Euro (EUR) under pressure. At the time of writing, EUR/USD trades around 1.1331, down 0.35% on the day.
National Bank of Canada's Alexandra Ducharme notes that Canadian Gross Domestic Product (GDP) growth moderated in July after three strong months, with both goods and services output flat.
TD Securities Macro Research Insight notes that markets began to sell off again following the flat July Canadian GDP print, despite its underwhelming nature. The move is concentrated in the front to mid-curve, with Bank of Canada (BoC) pricing unchanged and US yields near key technical levels.
Standard Chartered Global Research argues India’s Monetary Policy Committee will raise the repo rate by 25bps to 5.50% in October and deliver another 25bps hike in December. The authors highlight rising domestic inflation, robust GDP growth and hawkish MPC minutes as justification.
AUD/USD trades around 0.6990 at the time of writing on Tuesday, down 0.39% on the day, after failing to sustain an initial rally following the Reserve Bank of Australia’s (RBA) monetary policy decision.
USD/CAD remains on the front foot on Tuesday, supported by broad-based strength in the US Dollar (USD), while traders also digest the latest Canadian growth data. At the time of writing, the pair trades around 1.4187, hovering near levels last seen in early July.
US consumer sentiment loses some momentum in September, as the Conference Board’s Consumer Confidence Index recedes to 81.9 from August’s 88.6 (revised from 89.4).
According to Tuesday’s Job Openings and Labor Turnover Survey (JOLTS) from the US Bureau of Labor Statistics (BLS), job openings totaled 7.079 million at the end of August.
EUR/GBP trades little changed on Tuesday, remaining under pressure after buyers failed to break above 0.8660, a former multi-month support level that is now acting as resistance. At the time of writing, the cross trades around 0.8578.
Societe Generale’s Kenneth Broux observes Bunds and Bonos retracing from recent yield highs despite a strong upside surprise in Spain’s CPI. The bank warns that if this inflation pattern is replicated across the Euro area, risks are skewed to an upside surprise in core HICP. Bund short-covering and yield dips are seen as potentially shallow, with topside levels at 3.70%/3.74% and support at 3.54%.
European Central Bank (ECB) José Luis Escrivá said on Tuesday that they are still in not restrictive territory, as reported by Reuters.
Silver (XAG/USD) remains practically flat on Tuesday, trading at its lowest levels in nearly two months on Tuesday, around $60.80, failing to find follow-through above $61.00 and on track for a 8.5% monthly selloff in September.
GBP/JPY trades lower on Tuesday as the Japanese Yen (JPY) outperforms its major peers, supported by growing concerns that Japanese authorities could intervene in the currency market again. At the time of writing, the cross trades around 208.20, approaching September’s low near 207.
OCBC’s Christopher Wong observes that Singapore Dollar (SGD) has held relatively steady despite softer Asian FX, with USD/SGD around 1.2780.
Brown Brothers Harriman highlights that the Reserve Bank of Australia delivered a widely expected 25 bps hike to 4.60%, a 15-year high, and kept the door open to further tightening. AUD/USD initially rallied on the hawkish statement but reversed as Governor Michele Bullock signaled less urgency.
Gold (XAU/USD) holds firm on Tuesday after suffering a sharp sell-off at the start of the week. The move appears to be a corrective bounce, as the broader narrative remains tied to expectations of further Federal Reserve (Fed) interest rate hikes.
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