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July 1st - Six sources revealed that the European Central Bank (ECB) is considering doubling the required reserve ratio for banks to hold in interest-free accounts. This move would reduce the central banks own interest expenses and mitigate the side effects of its anti-inflationary measures. The sources said the potential increase is being discussed among ECB policymakers, with a proposed minimum reserve requirement to be raised from 1% to 2% of bank customer deposits and other funding sources. This would help central banks in cash-rich countries like Germany reduce losses from paying interest on bank deposits exceeding legal requirements. Over the past decade, these excess deposits have grown to trillions of euros through bond-buying stimulus programs. This move would also absorb some excess liquidity and advance the ECBs efforts to guide banks away from free cash, an issue that will be reconsidered in this years so-called framework review. The sources said a decision on the potential measure is expected before autumn. It is understood that internal discussions within the ECB are still in their early stages, and the Governing Council has not yet formally discussed the matter.July 1st - A survey reveals that global central banks are accelerating adjustments to their foreign exchange reserve structures as US political and geopolitical risks rise. A survey of 74 central banks by the Official Monetary and Financial Institutions Forum (OMFIF) in London shows that for the first time, "the number of central banks planning to reduce their dollar holdings over the next decade exceeds those planning to increase them," reflecting a decline in the dollars attractiveness. The report points out that geopolitical factors have become one of the main reasons influencing the willingness to invest in the dollar, coupled with rising uncertainty in US trade policy, driving a global trend of "de-dollarization." Despite this, the dollar still accounts for approximately 58% of global central bank reserves and will maintain its dominant position in the short term. Meanwhile, central bank demand for gold has increased significantly, with a record proportion of surveyed institutions planning to increase their gold holdings to hedge against geopolitical risks and financial system instability. Furthermore, the euro and the renminbi are also gaining attractiveness, receiving more attention in international trade and diversification, respectively, while some emerging market currencies are also favored. Overall, the global reserve system is showing a slow trend of diversification; the dollars dominance remains, but its marginal advantage is declining.The Federal Reserve accepted a total of $26.9 billion from 10 counterparties in its fixed-rate reverse repurchase operations.Sources at the European Central Bank: Policymakers are discussing raising the minimum reserve requirement ratio for banks from 1% to 2%.European Central Bank sources say a decision on minimum reserve requirements is expected in the fall.

Forecast for Silver Price: XAG/USD is rising quickly and is approaching the $20.00 mark

Alina Haynes

Sep 15, 2022 11:43

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Silver price recovers around the 50-day exponential moving average and advances towards a daily high of $19.69 on Wednesday after the US Labor Department reported that August PPI was in line with predictions of diminishing inflationary pressures on the producer side. Therefore, the XAG/USD is trading at $19.61, 1.86% higher than its initial price.

 

Before Wall Street opened, the Bureau of Labor Statistics (BLS) of the United States reported that the Producer Price Index (PPI) for August decreased by 0.1%, in line with expectations, while the year-over-year figure fell to 8.7%, less than the 9.8% reported in July. Meanwhile, the so-called core PPI, which excludes volatile goods, increased by 0.4% month-over-month and 7.3% year.

 

In the meantime, the US Dollar Index, a measure of the dollar's value against a basket of six currencies, ended Wednesday's session down 0.15 percent, at 109.648, weighed down by US Treasury yields, particularly the 10-year benchmark note rate, which remained unchanged throughout the day at approximately 3.404%.

 

The US Dollar Index reflects the aforementioned by declining by 0.09% and falling below the 110.000 barrier. Similarly, the US 10-year benchmark note rate exhibits signs of weariness, remaining flat at approximately 3.414%.

 

The fact that US 10-year TIPS yields, a proxy for actual yields, rose by only one basis point to 0.939% was a further factor supporting the white metal price.

 

On Thursday, the US economic calendar will contain jobless claims, retail sales, and the New York and Philadelphia Fed Manufacturing Indices, which will serve as a precursor to the ISM report in October.

 

The daily XAG/USD chart depicts the white metal as neutral to bearishly biased. Nonetheless, if silver buyers recapture the $20,000 threshold, this might pave the way for a test of a four-month-old downslope trendline near $20.20 prior to reaching the 100-day EMA at $20.39. A breach of the latter will reveal the cycle high from August 15 at $20.87, ahead of the psychological milestone of $21.00.


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