Palladium prices declined on Wednesday even as the dollar dipped against most major rivals, but the industrial metals faced pressures amid expectations of oversupply next year.

Oversupply

The Russian Nornickel company expects the palladium market to shit to a surplus of 300 thousand ounces in 2024, compared to a deficit of 200 thousand ounces in 2023 .

Nornickel wasn't targeted by direct western sanctions, and alone it produces 40% of the global palladium output, used to reduce exhaust fumes in automobiles. 

Nornickel noted that the automotive industry, which uses 80% of the global palladium supply, is slowly recovering following Covid 19 and the supply shocks of 2020 and 2021, and this demand on metals is expected to grow 1% this year.

The company noted that the increased consumption of palladium in 2022 and 2023 has been compensated with sales of accumulated inventories by car companies, with such inventory clearing efforts wrapping up in the second half of the year. 

The major company, which witnessed a 16% collapse in net profits during 2022, expects a global deficit in the palladium market by 300 thousand ounces in 2023. 

As for nickel, the company expects a surplus of 180 thousand tones in the nickel market during 2024.

Otherwise, the dollar index fell 0.4% to 103.7 as of 15:06 GMT, with a session-high at 104.3, and a low at 103.6.

On trading, palladium futures due in September fell 0.1% as of 15:07 GMT to $1,413.5 an ounce. 

Canadian dollar rose in European trade on Wednesday against a basket of major rivals, extending gains for another session against US dollar and hitting four-week high ahead of Bank of Canada's policy decisions. 

Bank of Canada is likely to maintain interest rates unchanged for the third straight meeting, but it's possible for it to raise interest rates by 25 basis points. 

USD/CAD fell 0.2% to 1.3375, the lowest since May 11, after closing up 0.3% on Tuesday against US dollar, the fourth profit in five days as global oil prices surged. 

Bank of Canada is expected to issue its decision and policy statements at 14:00 GMT. 

Canadian Rates

Canadian interest rates are standing at 4.5% currently, the highest since October 2007 before the financial crisis.

Estimates

Naturally, a surprise rate hike from BoC will bolster the loonie heavily against major rivals, however a decision in line with expectation wouldn't move the needle much.

Gold prices declined in European trade for the first session in three under pressure from the stronger dollar against major rivals, but the precious metal remains bound in a tight range of trading.

Now traders await more data on the future of the Fed's policy tightening cycle and the potential for more rate hikes. 

Gold Prices Today

Gold prices fell 0.4% to $1,955 an ounce, with a session-high at $1,966, after rising 0.1% on Tuesday, the second profit in a row amid strong haven demand. 

The Dollar

The dollar index rose 0.1% on Wednesday for another session, almost hitting 11-week highs at 104.69 against a basket of major rivals.

Markets are betting the Fed will maintain high interest rates for a longer duration of time. 

The Fed

Recent US data, which showed slower growth in the services sector and higher unemployment, gives the Fed room to cease policy tightening at the June meeting, while opening the door for a resumption in rate hikes at the July meeting. 

US Rates

Markets are pricing in a 20% chance of a 0.25% rate hike by the Federal Reserve in June. 

However, the likelihood for a 0.25% Fed rate hike in July surges to 65%, compared to 35% odds of no change. 

The SPDR 

Gold holdings at the SPDR Gold Trust fell 1.45 tones yesterday to a total of 938.11 tones. 

Sterling fell in European trade for the fourth straight session against dollar, amid a grim outlook for the UK economy in the second quarter of the year.

The dollar is maintaining its gains near 11-week highs amid strong bets on high US interest rates for an extended duration. 

GBP/USD fell 0.1% to 1.2409, with a session-high at 1.2438, after closing down 0.1% yesterday, the third loss in a row. 

UK Economy

Some global banks are expecting the UK economy to slow down sharply in the second half of the year, led by the housing sector, which might force Bank of England to cut interest rates early. 

JPMorgan's analysts are pointing to the deteriorating markets of the UK housing sectors with the background of high and stubborn inflation.

Mortgage approvals continue to decline, an indication that current financial conditions are weighing on consumers. 

JPMorgan forex strategists are now selling the UK pound, noting it's only a matter of time before an extended duration of decline due to weaker growth. 

Dollar

The dollar index rose 0.1% on Wednesday for a second session on track to hit an eleven-week high at 104.69 against a basket of major rivals. 

Markets are betting the Federal Reserve will maintain interest rates higher for a longer period of time, in turn underpinning the greenback.