Gold hits fresh record high before Powell's testimony
Gold prices rose in European trade on Tuesday on track for the third profit in a row, hitting a fresh record high and approaching the pivotal barrier of $3000 for the first time ever on haven demand amid mounting global trade concerns.
It comes ahead of the first part of Fed Chair Jerome Powell’s Congressional testimony, expected to provide clues on the path ahead for US interest rates this year.
Prices
Gold prices rose 1.2% to $2942 an ounce, a record high, with a session-low at $2904.
On Monday, gold rose 1.65%, the second profit in a row, trading above $2900 for the first time in history on Trump’s threats of imposing additional tariffs.
Trump's Tariffs
President Donald Trump announced a new batch of 25% tariffs on steel and aluminium imports, rattling the global markets.
He recently suspended a 25% tariff on Canadian and Mexican imports last week pending negotiations, but went ahead with implementing a 10% additional tariff on Chinese imports, triggering vows of retaliation.
Powell
Fed Chair Jerome Powell will testify today ahead of the Senate on the Fed’s monetary policies and decisions and outlook this year, and will likely provide important clues for investors.
According to the Fedwatch tool, the odds of a 0.25% Fed rate cut in March stood at just 6.5%.
SPDR
Gold holdings at the SPDR Gold Trust rose 2.58 tons on Friday, the second increase in a row, to a total of 871.08 tons, the highest since January 21.
Sterling skids to a week trough before Bailey's speech
Sterling skidded in European trade on Tuesday to a week trough against the dollar on track for the fourth loss in a row on risk aversion before Bank of England Governor Andrew Bailey’s remarks later today.
The speech will likely provide clues on the odds of further monetary policy easing and interest rate cuts this year, following the BOE’s rate cut last week.
The Price
The GBP/USD pair fell 0.2% today to $1.2345, the lowest since February 3, with a session-high at $1.2371.
The pair lost 0.3% on Monday, the third loss in a row on risk aversion after President Donald Trump’s threats of additional tariffs.
Bailey
Bank of England Andrew Bailey will speech on monetary conditions and the future of policies later today in London, and will likely provide important clues on the path ahead for UK monetary policies.
UK Rates
The Bank of England voted to cut interest rates by 25 basis points to 4.5% last week, the lowest since May 2023, and the third such rate cut since the launch of the current cycle of monetary easing last August.
The decision came as the preferred choice of 7 members in the voting committee, with two members voting in favor of a larger 0.5% rate cut.
The current odds of a 0.25% UK rate cut at the March policy meeting is standing at 70%.
Traders expect 65 basis points overall of UK interest rate cuts in 2025 according to interest rate futures.
Interest Rate Gap
Following the latest BOE meeting, the UK-US interest rate gap completely vanished, with upcoming GBP/USD movements relying heavily on evidence for upcoming policy moves by central banks in both countries.
Aussie gains ground after Anthony Albanese's remarks
The Australian dollar rose in Asian trade on Tuesday, approaching a two-week high against the US dollar following remarks by Australian Prime Minister Anthony Albanese about a constructive talk with US President Donald Trump, at which Trump agreed to look into exempting Australia from steel and aluminium tariffs.
It comes days before the Reserve Bank of Australia’s meeting next week, with traders looking for more clues on the odds of Reserve Bank of Australia rate cuts this year as inflation cools.
The Price
The AUD/USD rose 0.1% today to 0.6285, with a session-low at 0.6261.
The pair rose 0.1% yesterday, resuming gains and approaching a two-week high at 63.02 cents.
Albanese
Australia’s Prime Minister Anthony Albanese said Trump agreed to look into exempting Australia from the newly announced steel and aluminum tariffs.
It comes days after Trump announced plans to impose 25% new tariffs on all steel and aluminum imports into the US, while raising tariffs on any country that imposes tariffs on US products in an equal way.
Australia plays a secondary role in US steel and aluminum imports, but enjoys a special trade position with the US, including exemptions from Trump’s tariffs on these same metals in 2018.
Australian Rates
The Reserve Bank of Australia is convening next week to discuss latest economic developments and appropriate policies, especially as inflation continues to taper down.
The odds of an RBA 0.25% interest rate cut in February has surged from 55% to 80%.
Wall Street gains ground as US treasury yields drop
US stock indices gained ground today as treasury yields dropped, with markets analyzing the latest tariffs announced by President Donald Trump.
Trump stated on Sunday that he plans to impose 25% tariffs on steel and aluminium from all over the world.
Now investors await important US inflation data and Fed Chair Jerome Powell’s remarks later this week to gather more clues.
On trading, Dow Jones rose 0.1%, or 37 points as of 16:48 GMT to 44,340 points, while S&P 500 rose 33 points, or 0.5% to 6059 points, as NASDAQ rallied 1.1%, or 207 points to 19,730 points.