Precious metals spot values were mixed during early US trading, but were not straying too far in any one direction. This week has thus far proven to be fairly quiet from an economic data standpoint, and as such, the focus of the market has shifted towards the ever-evolving currencies market. The US Dollar has continued to perform well against its rivals and the US is really emerging as one of the safest economies to invest in. As the week plays out, I expect there to be continued focus thrown the way of currency markets and the factors influencing them.
On the geopolitical front, it is clear to see that the ceasefire agreement reached between Russian/pro-Russian and Ukrainian military forces is holding…at least for now. Due to the decrease in violence in Ukraine, precious metals have lost their one and only source for bullish underlying support. Now, metals will have to go it alone in a market atmosphere that is turning increasingly bearish by the day.
Market’s Focus Shifts to Next Week’s FOMC Meeting
Due to this week proving to be inordinately quiet, the market’s focus is already shifting to the possible outcomes of next week’s US Federal Open Market Committee meeting. After a report was released yesterday claiming that a Federal Reserve survey indicated that investors just might be underestimating how quickly the Fed can raise interest rates, the minds of investors are once again convinced that rates will be raised sooner rather than later. As you probably could have guessed, this growing belief is only helping the Dollar gain more strength in the face of its rivals. Against the Euro currency especially, the US Dollar has been doing particularly well. The reason for this is due to the fact that as the US talks about tightening its economic policy, the European Union is actively seeking to loosen theirs. As this plays out, it is highly likely that raised interest rates in the US will translate into even more support for the greenback.
In other news from Europe, a report released during the early morning hours of Wednesday said that Germany was auctioning off 10-year notes for a record low yield of 1.05%. As a result, demand for the notes was robust and consistent. In the wake of the declining Euro, investors have turned to the safer prospect of German sovereign debt.
As the last few days of the week play out, they will, in all likelihood, be as slow as the last three have been. Expect focus to remain on currency markets, and especially the progress of the USD.