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On May 22, Federal Reserve Governor Jerome Waller stated on Friday that given the growing risks of inflation, the Fed should no longer consider further interest rate cuts as a default plan. This comes after Wallers support for rate cuts in January. In a speech, Waller said that with the ongoing conflict in the Middle East, rising costs of oil and other commodities are increasingly likely to trigger broader and more persistent inflation in the economy. He stated that it is time for the Fed to stop signaling that its next move is most likely another rate cut. Waller indicated that maintaining interest rates in the current range of 3.5% to 3.75% is likely the right approach for the foreseeable future. He added, "If inflation does not subside quickly, I cannot rule out the possibility of future rate hikes."Federal Reserve Governor Waller: No changes to policy rates should be expected in the near term; the outcome will heavily depend on the duration of the conflict in Iran. Inflation faces the risk of becoming more persistent, and price pressures are increasing.Federal Reserve Governor Waller: The current stance is to keep interest rates stable in the near term.Federal Reserve Governor Waller: If inflation expectations lose their anchor, interest rates will need to be raised.The US April Conference Board Leading Economic Index monthly rate, the final May University of Michigan Consumer Sentiment Index, and the final one-year inflation expectations will be released in ten minutes; Federal Reserve Governor Waller will also speak in ten minutes.

Forecast for Gold Price: XAU/USD consolidates above $2,000 as investors await initial US S&P PMI data

Daniel Rogers

Apr 21, 2023 13:52

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During the Asian session, the price of gold (XAU / USD) is oscillating above the psychological resistance of $2,000.00. After a gradual increase, the price of gold has leveled off near $2,005.00 as investors await the release of preliminary S&P PMI data for the United States.

 

S&P500 futures have added some gains during the Asian session following three consecutive declines. As a result of Elon Musk's price-cutting frenzy, Tesla's revenue projections were gloomy, which dampened market sentiment. Near 101.77, the US Dollar Index (DXY) has extended its correction. The USD Index has been consolidating in a range between 100.90 and 102.03 for the past several trading sessions. Therefore, a move that exceeds the previously specified limit will be considered decisive.

 

The subdued USD index weighs on US Treasury yields as well. The demand for U.S. government bonds has increased as weekly unemployment claims have increased. The number of individuals claiming unemployment benefits rose to 245K, exceeding the consensus estimate of 240K. This indicated a softening in the labor market and bolstered expectations that the Federal Reserve (Fed) will not raise interest rates after the monetary policy meeting in May.

 

In the future, the publication of the preliminary US S&P PMI data will determine the impact of the Fed's rate hikes on the scope of economic activity. According to projections, the Manufacturing PMI and Services PMI will decline to 49.0 and 51.5, respectively. A preliminary PMI reading that is weaker than anticipated could impact heavily on the U.S. dollar.

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