Markets Week Ahead: Gold Overreacts, Sterling Sinks and USD Advances – DailyFX

Suggesting the possibility of a change in momentum with the golden whipsaw

Precious metals rallied phenomenally following the FOMC meeting and summary of the latest economic forecasts. The US dollar acted as a vent for all the hawkish sentiment that was priced into the market. Some in the market feel obligated to remove one interest rate cut from the Fed’s schedule after data on U.S. economic activity, employment and inflation were revised higher than expected ahead of its March meeting. There is widespread speculation that this may be the case.

This view spurred the dollar’s rise. But the Fed narrowly held on to its December forecast of requiring three 25-basis point rate hikes in 2024, the U.S. dollar fell sharply, and gold hit a record high.

Now that the market has had a few days to digest the data and the Fed’s guidance, the dollar has resumed its more medium-term uptrend, triggering a sharp reversal in gold. A possible evening start suggests that gold prices may continue to move slowly into next week.

gold daily chart

Source: TradingView, Author richard snow

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Pound falls after hawkish MPC members give in

The Bank of England kept interest rates unchanged as expected, but the market is focused on how the vote will be split as it became clear at the February meeting that the three parties were divided on whether to raise, keep, or cut interest rates. It increased to

Most read: Bank of England leaves interest rates unchanged; vote turns dovish; GBP/USD declines

However, encouraging reports on inflation in February appear to have persuaded the two remaining hawks on the committee to vote for hold, with eight votes in favor, including one from Swati Dhingra, known as a dov. 1 vote decreased. Next week will be very quiet in terms of planned risk events, with Good Friday shortening the trading week in many Western countries, including the US and UK. With liquidity likely to be low, Friday’s PCE data could increase volatility heading into the weekend.

GBP/USD daily chart

Source: TradingView, Author richard snow

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Technical and Fundamental Forecasts – W/C March 25th

USD Forecast: PCE data steals the show.Settings for EUR/USD, USD/JPY, and GBP/USD

In this article, we analyze the outlook for the US dollar, focusing on the three most traded currency pairs: EUR/USD, USD/JPY, and GBP/USD. We’ll detail the key technical levels that are worth paying attention to over the next few days.

Gold Weekly Forecast: Gold’s Soaring Reveals Fed Overreaction

Gold prices are reigning again after a massive push to new all-time highs.However, recent price trends and a strong dollar suggest further cooling down the road.

British Pound Weekly Forecast – GBP, Gilt Yield Slide, FTSE 100 Rise Further

There will be little significant data or events to move pound assets in the upcoming holiday-shortened week. The pound remains under near-term pressure.

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— Written by Richard Snow for DailyFX.com

Contact and follow Richard on Twitter: @RichardSnow