Wednesday, 16 January, 2019

Gold steady as dollar sags on Fed rate pause bets

The Dow rallied following Fed Chairman Jerome Powell’s comment that there was no “preset path” toward raising interest rates The Dow rallied following Fed Chairman Jerome Powell’s comment that there was no “preset path” toward raising interest rates
Ginger Lawrence | 10 January, 2019, 14:52

On Friday, Powell told the American Economic Association that the Fed is not on a preset path of interest rate hikes and that it will be sensitive to the downside risks markets are pricing in. The pan-European STOXX 600 .STOXX finished down 0.15 percent.

The dollar fell for a third consecutive day against its rivals on Monday on growing bets the USA central bank will press the pause button on its rate hike cycle in the coming months.

"The Fed is listening to the market and has acknowledged flashing market signs", said Sim Moh Siong, currency strategist at Bank of Singapore.

The upbeat mood gave a lift to high-yielding currencies, with South Korea's won and the Indonesian rupiah soaring against the dollar, while there were also healthy gains for Australia's dollar.

Financial markets have been rattled by heightened worries about slowing global growth, especially in the United States and China, though data on Friday showed strong U.S. job growth.

The gains extended Friday's rise following robust US employment data and a message from the Federal Reserve that it would be patient and flexible in policy decisions this year. If the Fed holds rates in 2019, analysts see slim chances of further greenback appreciation. That compares with the mid-2000s, when the Fed increased the benchmark rate by 4.25 percentage points over two years.

"Last Friday's strong U.S. jobs data suggested that recession fears were overblown", said Philip Wee, currency strategist at DBS in a note. Trump has repeatedly complained about the Fed's rate hikes and sought to pin blame for stocks' decline on the Fed and Chairman Jerome Powell, whom Trump has discussed firing, Bloomberg reported last month.

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Expectations of no further rate hikes this year is likely to keep the greenback under pressure.

Among other precious metals, silver was up 0.4 percent at $15.75 per ounce, while platinum rose 0.8 percent to $829, having touched a more than one-month high of $831.10 earlier in the session. It rallied 2.1% Friday ahead of a well-flagged move by the People's Bank of China to add a net 800 billion yuan ($116.48 billion) of liquidity into the banking system by cutting banks' reserve requirements.

Analysts expect further monetary stimulus from Beijing in 2019. The currency has now advanced nearly 1 per cent since mid-December.

Powell on Friday said the US central bank would be more sensitive to downside risks in the market, adding that it was "prepared to shift the stance of policy" if needed.

The Dow Jones Industrial Average .DJI rose 98.19 points, or 0.42 percent, to close at 23,531.35, the S&P 500 .SPX gained 17.75 points, or 0.70 percent, to finish at 2,549.69 and the Nasdaq Composite .IXIC added 84.61 points, or 1.26 percent, to end at 6,823.47.

The two sides have until March 1 to make a deal, after which Trump has pledged to ramp up tariffs to 25 percent, from 10 percent, on $200 billion worth of Chinese imports.

On Friday, gold futures ended down $9.00, or 0.7%, at $1,285.80 an ounce.