Gold dips as US yields tick higher, spotlight on Fed

“Oh yes, the past can hurt. But you can either run from it, or learn from it.” —Rafiki 

HEADLINES

• Dollar falls to three-week low as US inflation data backs Fed pause view
• Gold dips as US yields tick higher, spotlight on Fed
• Oil prices rise over 3% after China rate cut
• U.S. stocks rally as inflation data cements bets on rate hike pause
• Treasury yields climb after CPI report shows slowing inflation ahead of Fed decision
• AUD/USD set to rally over the medium term – CIBC 
• AUDUSD Near Term: Upside favored

Dollar falls to three-week low as US inflation data backs Fed pause view

The dollar dropped to a three-week low on Tuesday on news of the smallest annual increase in inflation in more than two years, cementing expectations that the Federal Reserve will pause interest rate hikes at its two-day meeting ending on Wednesday.

The U.S. consumer price index (CPI) edged up 0.1% last month as gasoline prices fell, after increasing 0.4% in April. In the 12 months to May, the CPI climbed 4.0%, the smallest year-on-year increase since March 2021, after rising 4.9% in April.

So-called core CPI increased 0.4% in May, however, the same percentage rise for the third straight month.

COMMODITIES

Gold dips as US yields tick higher, spotlight on Fed

Gold slipped on Tuesday as Treasury yields rebounded, while traders firmed up bets the Federal Reserve would stand pat on interest rates after data showed U.S. consumer price gains slowed in May.

While gold is seen as a hedge against inflation, higher rates to tame price pressures generally weigh on the non-yielding asset’s appeal.

ENERGY

Oil prices rise over 3% after China rate cut

Oil prices climbed over 3% on Tuesday, recovering from steep losses the previous session, after China's central bank lowered a short-term lending rate for the first time in 10 months.

The rate cut, aimed at adding momentum to a hesitant post-pandemic recovery in the world's second-largest economy and biggest crude importer, is likely to increase oil demand.

Prices on Monday fell by about 4%, in part because of concerns about the Chinese economy after disappointing economic data last week.

A rise in global supplies is weighing on the market, along with concerns about demand growth, ahead of a U.S. Fed monetary policy meeting concluding on Wednesday.

STOCKS

U.S. stocks rally as inflation data cements bets on rate hike pause

The S&P 500 and Nasdaq climbed to 14-month highs on Tuesday after data showed consumer prices rose modestly in May, boosting bets that the Federal Reserve will not raise interest rates at the end of its policy meeting on Wednesday.

Stocks rose after a U.S. Labor Department report showed the consumer price index (CPI) rose 0.1% last month after a 0.4% jump in April, with core inflation unchanged at 0.4%.

On a year-on-year basis, headline inflation increased by a less-than-estimated 4.0%, reflecting declines in the cost of energy products and services, including gasoline and electricity.

Treasury yields climb after CPI report shows slowing inflation ahead of Fed decision

U.S. Treasury yields climbed Tuesday after a key inflation report showed price increases slowing, potentially bolstering the case for the Federal Reserve to skip a rate hike this week.

The May consumer price index showed an annual increase of 4.0%, the lowest since 2021, and just 0.1% month over month. So-called core inflation, which strips out volatile food and energy prices, was hotter with 5.3% annual increase and 0.4% monthly change.

The CPI results were in line with the Dow Jones consensus estimates.

ANALYSIS

AUD/USD set to rally over the medium term – CIBC 

“We expect AUD/USD to appreciate in the coming quarters due to continued RBA hawkishness, and medium-term USD weakness alongside an anticipated pick-up in Chinese demand over time.

In the near-term, there are slight headwinds from the USD side, which should cap short-term AUD/USD strength, but we still expect slow appreciation over the forecast horizon due to the above factors. 

AUD/USD – Q3 2023: 0.68 | Q4 2023: 0.69”

CHART

AUDUSD Near Term: Upside favored

Technical View: Long position above 0.6755. Target 0.68. Conversely, break below 0.6755, to open 0.6735.

Comments: The pair remains supported. Further advance favored.

CALENDAR

*Times in GMT

Source: FX Street Economic Calendar

Footnotes
https://www.reuters.com/markets/currencies/dollar-dips-ahead-us-inflation-data-central-bank-meetings-2023-06-13/
https://www.cnbc.com/2023/06/13/gold-ticks-up-ahead-of-us-cpi-fed-meeting.html
https://www.reuters.com/business/energy/oil-prices-inch-higher-bargain-hunting-ahead-fed-rate-decision-2023-06-13/
https://www.reuters.com/markets/us/futures-rise-ahead-inflation-reading-fed-meet-focus-2023-06-13/
https://www.cnbc.com/2023/06/13/treasury-yields-dip-ahead-of-key-inflation-data-fed-meeting.html
https://www.fxstreet.com/news/aud-usd-set-to-rally-over-the-medium-term-cibc-202306131314