USD hit by another data miss; gold and silver push up

<p>The recurring disappointment in US retail sales (fifth consecutive month below consensus expectations) may have been offset by upward revisions in the March figure, but there […]</p>

The recurring disappointment in US retail sales (fifth consecutive month below consensus expectations) may have been offset by upward revisions in the March figure, but there is reason for concern over the increasingly consumer-dependent US economy, particularly with the continuous lack of windfall gain to demand from improving weather and falling oil prices in early Q2. 

The notable reaction in currency markets is highlighted by the speed at which traders sell US dollars on each and every US data miss – as the case for a summer Fed hike sustains another blow.  This is leaving little choice for metals but to extend their recent rally.

Metals summer resurrection

Gold and silver reveal key improvements on the technical side, with the yellow metal breaking above its 100-day moving average, while retesting its 200-day moving average for the first time in three months.

Silver appears to have the brighter prospects as it breaks above its 200-DMA, showing strong prospects for an extended advance, unlike in the failure of late January.

If the Fed is seen holding rates into Q2 and Q3 due to weakness in growth and employment despite stabilising inflationary dynamics, then the case for metals is bolstered further. In such a scenario, markets will take a generally USD-negative view, further lifting the usual anti-USD trades (long gold, oil, euros and commodity FX).

BoE balances inflation with rates

The Bank of England’s quarterly inflation report sounded off a dovish tone with regards to its growth forecasts, downgrading 2015 GDP to 2.5% from the 2.9% in February, and lowering 2016 and 2017 GDP projections by 0.3% to 2.6% and 2.4% respectively.

Interestingly, the BoE mentioned sterling appreciation and higher interest rate horizon as the basis for its growth downgrades, which in our view is a GBP-positive.

The report had initially weighed on sterling across the board, but we expect the currency to find support near 1.5600 as the Bank of England remains one of only two G10 central banks expected to raise interest rates within the next six to nine months.

And let’s not forget those jobs figures – released earlier this morning- prolonged declines in the unemployment rate to 5.5%, while average earnings rising to fresh four-year highs.

Gold May 13 2015


Build your confidence risk free
Join our live webinars for the latest analysis and trading ideas. Register now

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.