Gold peaks, Yen soars: Eyes on Powell's testimony

Following the first day of Federal Reserve Chair Jerome Powell's testimony before the House Financial Services Committee, attention remains focused on the second and final part of his testimony scheduled for today before the Senate Banking Committee.

Dollar vs Gold

last week's initial jobless claims were revised upward to 217K from 215K, slightly exceeding the estimated 215K. Continuing claims also surpassed expectations, coming in at 1.906M compared to the estimated 1.889M. given gold the push it needed to continue the upward momentum, marking the seventh consecutive trading session of gains and reaching record highs above $2,160 per ounce. Several factors, including expectations of a rate cut by the Federal Reserve in June and heightened safe-haven demand amid uncertain global financial conditions, have fueled the surge in gold prices. Although 10-year US Treasury yields saw a slight uptick rebounded during today's European session, the remain under their local highs of 4.22% we saw earlier this week. As anticipation builds ahead of Powell's testimony, the dollar has weakened to its lowest levels in five weeks.

Euro Post ECB decision

Moving to the European Central Bank (ECB), key interest rates have been maintained, with interest rate at 4.5%. The ECB also announced a reduction of EUR 7.5 billion in the PEPP program for the second half of the year. Despite these measures, economic projections have been revised downward:

GDP growth expected to reach only 0.6% for 2024 and inflation projected at 2.3%.

Persistent domestic price pressures, driven in part by wage growth, continue to pose challenges despite easing underlying inflation. The market's adjusted expectations for interest rate cuts have led to a slight decline in the EURUSD exchange rate. Market participants await further insights or guidance from ECB President Christine Lagarde in the days ahead.

Japanese Yen under the spotlight

The Japanese yen continue to show strength as both the USDJPY and EURJPY pairs plummet to their lowest levels in a month. The Japanese currency is being propelled by the need of higher wages considered crucial for reaching the 2% target, and by January's wage growth data that exceeded expectations, further strengthening the case. Additionally, this amplifies hawkish sentiment for the JPY.