Gold set for weekly gain on Fed pause bets

“The road to success is dotted with many tempting parking spaces.” —Will Rogers 

HEADLINES

• Sterling strengthens against dollar as chances of Fed 'skip' rise
• Gold set for weekly gain on Fed pause bets
• Oil rises 3% on US debt ceiling progress, traders on alert for OPEC+ meeting
• Wall St falls as labor data spurs rate hike jitters before debt ceiling vote
• U.S. 10-year Treasury yield falls as traders weigh new economic data, debt ceiling progress
• EUR/GBP set to trade towards 0.8550 – Credit Suisse 
• USDJPY Near Term: Downside favored

Sterling strengthens against dollar as chances of Fed 'skip' rise

The pound edged up on Thursday, taking advantage of a dip in the dollar after Federal Reserve officials indicated the central bank might skip a rate hike this month, while UK data painted a picture of an increasingly gloomy economy.

Data from the Bank of England (BoE) showed British lenders approved fewer mortgages in April than in March and the value of new loans also fell, highlighting the softness in the housing market.

A separate report earlier from mortgage lender Nationwide showed UK house prices fell by the most since 2009 in the 12 months to May, and the country's housing market faces further headwinds after a recent jump in borrowing costs.

COMMODITIES

Gold set for weekly gain on Fed pause bets

Gold prices were set on Friday for their biggest weekly gain in nearly two months, as hopes of a pause in the U.S. central bank’s policy tightening campaign bolstered bullion’s appeal.

Bullion has gained 1.5% so far in the week, heading for its biggest rise since the week ended April 7.

U.S. central bankers should not raise interest rates at their next meeting, Philadelphia Federal Reserve President Patrick Harker said on Thursday, even though high inflation is coming down at a “disappointingly slow” pace.

Markets now see a 79.6% chance of rates remaining unchanged in June. Gold, which does not yield any interest of its own, loses appeal when interest rates rise.

ENERGY

Oil rises 3% on US debt ceiling progress, traders on alert for OPEC+ meeting

Oil prices rose on Thursday by the most in two weeks ahead of an OPEC+ meeting on Sunday, while House of Representatives passage of a bill to suspend the U.S. debt ceiling helped to offset the impact of rising inventories in the country.

U.S. crude oil stockpiles rose unexpectedly last week, as imports jumped and strategic reserves dropped to their lowest since Sept. 1983, according to data from the Energy Information Administration.

STOCKS

Wall St falls as labor data spurs rate hike jitters before debt ceiling vote

U.S. stocks closed down on Wednesday as a deal to raise the federal debt ceiling headed for a crucial vote in Congress, while unexpectedly strong labor market data rattled investors who fear the Federal Reserve might hike interest rates again in June.

The House of Representatives is expected to vote in the evening on a bill to lift the $31.4 trillion debt limit, a critical step to avoid a destabilizing default that could come early next week without congressional approval.

House passage would send the bill to the Senate, where debate could stretch to the weekend, just before the June 5 date when the government could start to run out of money.

U.S. 10-year Treasury yield falls as traders weigh new economic data, debt ceiling progress

U.S. Treasurys slid on Thursday as the debt ceiling crisis came closer to a resolution and traders assessed the latest economic data.

The Republican-controlled House of Representatives on Tuesday passed the Fiscal Responsibility Act with a 314-117 majority, boosting optimism about the debt ceiling crisis being resolved ahead of the June 5 deadline. This is the first date on which the U.S. could default on its debt obligations, which would likely trigger widespread economic issues across global financial markets.

ANALYSIS

EUR/GBP set to trade towards 0.8550 – Credit Suisse 

“With spot now through our original, long-held EUR/GBP target at 0.8700, we now look for the pair to trade towards 0.8550.

Sonia futures already price GBP as being a stand-out G10 high yielder by December at a terminal rate around 5.50%, a rate reached by the BoE hiking by 25 bps at each of the next 4 meetings. While we think this is probably enough given the data flow and the BoE’s typically slow and deliberate approach, the simple fact that GBP will likely enjoy a material yield premium over the EUR for the far foreseeable future is likely still being digested after so many months of GBP having been a favourite market short. This is what allows for further EUR/GBP downside momentum towards our target.”

CHART

USDJPY Near Term: Downside favored

Technical View: Short position below 139.2. Target 138.45. Conversely, break above 139.2, to open 139.6.

Comments: The pair remains under pressure. Further weakness favored.

Source: Trading Central 

CALENDAR

*Times in GMT

Source: FX Street Economic Calendar

Footnotes
https://www.reuters.com/markets/currencies/sterling-strengthens-against-dollar-chances-fed-skip-rise-2023-06-01/
https://www.reuters.com/article/global-precious/precious-gold-set-for-weekly-gain-on-fed-pause-bets-idUSL4N37U04S
https://www.reuters.com/markets/commodities/oil-falls-after-large-surprise-build-us-crude-stocks-2023-06-01/
https://www.reuters.com/markets/us/futures-dip-ahead-debt-ceiling-deal-vote-2023-05-31/
https://www.cnbc.com/2023/06/01/us-treasurys-as-debt-ceiling-bill-clears-house-progresses-to-senate.html
https://www.fxstreet.com/news/eur-gbp-set-to-trade-towards-08550-credit-suisse-202306011342