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Gold keeps rising

06 Aug, 2020

The Bank of England shocks the market

Data and news released yesterday:

According to statistics, the coronavirus pneumonia cases in the United States were diagnosed in August 5th, Beijing Time, reaching 4 million 970 thousand cases, The number of deaths was over 160 thousand, reaching 161,556.

The ADP employment report shows that private jobs in the United States increased only 167,000 in July, far less than the expected increase of 1.5 million.

The NASDAQ closed at a record high for the 31st time this year as the market was still optimistic that the US was about to reach an agreement on a financial rescue plan.

Trump said he might suspend the payroll tax as part of his government's efforts to help the economy after the coronavirus was suspended.

However, the rebound in service industry was not as strong as expected. Meanwhile, retail sales rose 5.7% in June compared with may, according to Eurostat.

The forward-looking forecast of the interest rate resolution of the Bank of England in July indicates that there is no other policy change in the Bank of England's resolution except for the reduction of the scale of bond purchase that has been implied. The resolution in August is likely to be a transitional resolution.

 

Market Volatility:

The US dollar index fell 0.42 per cent to around 92.84, after earlier approaching a more than two-year low position of about 92.55 hit last week.

The euro rose to an intraday high in the New York session, rising 0.9% to around 1.1905, approaching the highest point of 1.1909 since May 2018, and the number of open positions of futures contracts reached a record high.

The pound bottomed out and closed near its high of 1.3113. In July, the PMI of the UK service industry reached a new high since July 2015, and the market focused on the interest rate resolution of the Bank of England.

The USD/JPY fell 0.11% to around 105.60, down 0.4% in the session. The Japanese yen has not been targeted by the Japanese yen, which will continue to be favored by Kuroda.

The spot gold reached a new high, with spot gold rising by 1.81% at one time, setting a new high to 2,055.78 US dollars / ounce. Investors hoarded safe haven gold due to the weakening of the US dollar and the decline of US bond yield.

The WTI crude oil futures in September rose by US $0.49, or 1.18%, to settle at US $42.19/barrel; Brent's October crude oil futures rose by US $0.74, or 1.66%, to US $45.17/barrel.

 

Future forecast of CWG:

The data of the Asian session of this trading day was light; in the European session, the market focused on the announcement of interest rate resolution, meeting minutes and monetary policy report of the Bank of England; in the US session, the data of the US Challenger enterprise layoffs in July and the number of initial jobless claims after the quarterly adjustment last week were released. There is no doubt that it has a guiding role for the non-farm tomorrow.

Institutional Analysis: Goldman Sachs analysis indicates that if the diversification of foreign exchange reserves is taken into account, there is upward risk in the medium term of the euro. The diversity of official foreign exchange reserves is determined by different factors compared with the asset allocation of the private sector. For the U.S. dollar, it is only a matter of time before the US dollar's share of foreign exchange reserves is expected to decline, given that the US government's foreign policy may shift to us priority and contribute less to global production. More upside is expected for the euro, which could rise to 1.25 in the next 12 months. At the same time, according to the recent gains in exchange rate, it is expected that the exchange rate will continue to rise further in the short term.

 

Financial calendar:

Economic data:

19:00 July 30 challengers cut jobs

20:00 Us initial jobless claims after last week's quarterly adjustment

Central Bank News:

14:00 Bank of England releases interest rate resolution, meeting minutes and monetary policy report

14: 15 Central Bank of India announces interest rate resolution

22:00 Dallas Fed chairman Kaplan delivered a speech on the U.S. economy at the official forum of the international monetary and financial institutions

At 00:30 the next day, New York Fed officials delivered a speech at the central bank forum in Singh

 

CWG financial knowledge:

British official bank interest rate: the main task of the monetary policy committee of the Bank of England is to establish a monetary policy position by adjusting the overnight lending rate, which is the key to determine the short-term interest rate. Through this mechanism, the Bank of England tries to influence the price level, so as to keep inflation within the target range, while maintaining economic growth and employment stability. The direction of interest rate development in the future is usually much more important than the current interest rate.