The US dollar gained some ground against its competitors on Wednesday morning as markets await Jerome Powell’s speech due later in the day. The Fed Chair’s remarks at the Division of Research and Statistics Centennial Conference in Washington will be scrutinized by economists for fresh cues about the central bank’s next policy move.

Oil prices fell close to a 3-month low as fears regarding a dropping demand in the US and China prevailed. ING’s commodity analysts noted that “the market is clearly less concerned about the potential for Middle Eastern supply disruptions and is instead focused on an easing in the balance.”

In the UK, the Bank of England’s (BoE) Chief Economist Huw Pill said that a first rate cut to the BoE’s rates in August 2024 “doesn’t seem totally unreasonable” to him. Commenting on monetary policy, he added “But if we have the restrictive policy for too long, then the danger is...we trigger a recession, we trigger an excessive slowdown in the economy.”
 

China CPI October Report

The National Bureau of Statistics (NBS) will publish data regarding China’s inflation in October. Economists expect headline inflation to come in at –0.1% on an annualized basis and 0% on a month-to-month basis. A return to deflation, after ultra-low growth in August and a 0% CPI reading in September, would impact the government’s efforts to restore confidence in China’s economy. The Chinese economy remains in a fragile state due to weak consumer confidence and a severe liquidity crisis in the property sector.
 

UK GDP Q3 2023 Preliminary Data

The Office for National Statistics (ONS) will publish preliminary GDP data for the third quarter of 2023 on Friday. Market analysts expect the GDP growth rate to come in at 0.5% on an annualized basis and –0.1% on a quarterly basis. Economists suggest that a GDP contraction could have occurred as businesses have dialed down their activities on the back of weaker consumer demand.

The BoE’s governing board has suggested that the economy is likely to see 0% growth until 2025 while inflation has dropped to 6.7% but still far from the BoE’s 2% target. The UK’s Chancellor Jeremy Hunt is expected to deliver the Autumn Statement on November 22nd with the government ruling out any income tax cuts that could potentially give relief to consumers.
 

Commerzbank: Gold Prices Will Likely Top At $2,000

As gold prices continue their slide since last Friday, Commerzbank’s commodity analysts suggest that the precious metal sheds some of its geopolitical premium. In their report to investors, they note that “the US Dollar and bond yields are not currently the main drivers of the gold price. The escalation of the Middle East conflict and the resulting demand for Gold as a safe haven played a key role in the upswing since early October. Because the Middle East conflict has not escalated any further so far, despite the Israeli army’s ground offensive in the Gaza Strip, the gold price appears to be shedding some of its geopolitical risk premium again. It looks as if $2,000 will be as good as it gets for the gold price for the time being.” 

On the other hand, economists at ANZ noted in a report that central banks' gold purchases across the world remain a supportive factor for their prices. China is mentioned as an example in their note stressing that “China topped up its gold holdings for a 12th straight month in October, with its reserves rising by about 740,000 ounces (~23t), according to official data.” 

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