Dollar edges up ahead of US services data
The dollar index rose in European trade for the first time in three days against a basket of major rivals, with gains still limited as US 10-year treasury yields lost ground.
The gains come ahead of important US services sector data for February, which could provide clues for the future of US interest rates.
The Index
The dollar index rose 0.1% to 103.95, with a session-low at 103.83, after closing down 0.1% yesterday, the second loss in a row as investors focused on lower-yield currencies.
US Treasury Yields
US 10-year treasury yields fell 0.9% on Tuesday on track to hit multi-week lows, in turn boosting non-yielding assets.
The gains came as investors once again believe the Federal Reserve will start cutting interest rates in June, maybe even May.
US Rates
The current odds for a 0.25% US interest rate cut in May stand at just 25%, while the odds for such a cut in June stand at 73%.
US Services Sector
Now investors await important US services data later today to get a better view of the state of the economy in the first quarter.
US services PMI is expected down slightly to 53.0 in February from 53.4 in January.
Gold surpasses $2100 to near all-time highs
Gold prices rose in European trade on Tuesday on track for the fifth profit in a row, scaling a three-month high after trespassing the psychological level of $2100 with the previous metal approaching record highs.
The gains come amid a tumble in US 10-year treasury yields following recent US data, which bolstered the case for early US interest rate cuts in May or June.
Gold Prices Today
Gold prices rose 0.4% to $2123 an ounce, with a session-low at $2110, after rallying 1.7% on Monday, the fourth profit in a row as the greenback lost ground.
The yellow metal scaled a record high at $2146 an ounce on December 4th, 2023 on strong odds of early Federal Reserve rate cuts, and strong haven demand.
US 10-year treasury yields fell 0.9% on Tuesday on track to hit multi-week lows, in turn boosting non-yielding assets.
The gains came as investors once again believe the Federal Reserve will start cutting interest rates in June, maybe even May.
Weak Data
Recent Washington data showed US manufacturing slowed down more than expected in February, while Michigan University’s consumer confidence index fell as well.
US personal spending data clocked in the weakest reading in three years.
US Rates
Following the data, the odds of a 0.25% Fed interest rate cut in May came at 25%, while the odds for such a cut in June rose to 73%.
Traders now expect 75 basis points of total Fed rate cuts this year, down from 150 basis points in previous forecasts.
Investors also await important data this week, including the February payrolls report, and Fed Chair Jerome Powell’s Congressional testimony.
Powell’s Testimony
Markets await Fed Chair Jerome Powell’s Congressional testimony this week, which could provide crucial clues on the likely path ahead for policies and interest rates.
Federal Reserve member Raphael Bostic said the Fed isn’t exposed to urgent pressures to cut interest rates.
The SPDR
Gold holdings at the SPDR Gold Trust fell 2.3 tonnes yesterday, to a total of 821.47 tonnes, the lowest since July 26, 2019.
Sterling gives up two-week high ahead of the British budget release
Sterling declined in European trade on Tuesday against a basket of major rivals, moving away from two-week highs against the dollar on profit-taking while investors shun risks ahead of the release of the UK general budget for 2024.
The budget will stipulate government spending, expected income and borrowing, and targeted investments.
GBP/USD
GBP/USD fell 0.15% to 1.2673, with a session-high at 1.2695, after closing up 0.3% on Monday, marking a two-week high at 1.2707.
The 2024 Budget
Tomorrow, the UK finance minister Jeremy Hunt will announce the details of the general budget for 2024 with all spending, income, and borrowing detailed.
Hunt will likely calm down concerns about big tax cuts before general elections, and will likely announce a positive financial outlook for the economy.
Estimates
Barcly’s strategic experts said there could be some stimulus measures in the 2024 budget, but they won’t offer much support for the pound.
Societe Generale Bank analysts note that such financial events usually don’t move the pound, unless the borrowing and spending estimates cause an unaccounted for reaction in government yields and Bank of England interest rates.
The analysts believe that the sense of financial responsibility was restored with Prime Minister Sunak and finance minister Hunt, which led to lower government bond yields and lower debt service costs.
What stimulus measures are contained in the budget will be aimed at boosting consumer spending and economic performance, but could risk maintaining inflation higher for an extended duration.
The green hydrogen industry in the Middle East.. Big momentum and promising future
Over 350 specialists in the green hydrogen industry convened in Dubai last week to give hydrogen a practical test.
From two days of discussions, it became clear that using hydrogen as a future fuel for the Middle East and North Africa region wouldn’t be easy, as the rate of project announcements in the field slowed down in recent years.
However, a sense of hope spread in the conference, that carbon-free hydrogen is a promising source of energy for the region’s future.
Several hydrogen projects are alive and developing worldwide, and here we cast the light especially on a huge influential green hydrogen project in Saudi Arabia, which holds great potential.
Neum Launches
The green hydrogen project launched in Neum with promises of producing 600 tonnes of hydrogen a day, and nearly 1.2 million tonnes of green ammonia for production, starting in 2026.
The project started on shaky ground, but now a factory with a 2.2 gigawatt capacity was constructed, and infrastructure of ammonia exporting is being laid.
The project gained big momentum after securing a 30-year purchase agreement with the Air Products company for all green ammonia produced in the factory.
Over 20 financial institutions tried to invest in the project, and indeed over $6.1 billion have been secure so far.
Various Methods
Interest in hydrogen technology is spreading in the Middle East, with the Oman Sultanate for example launching the Hydrogen Oman company to work with developers and infrastructure, and build pipelines in support of the project in upcoming months.
The UAE as well announced ambitious plans to nationalize hydrogen production, and has developed a “framework” for hydrogen projects in the next decade.
Egypt as well has signed 30 memorandums of understanding with various companies to develop various green energy, including hydrogen projects, focused especially in the Swiss Canal Economic Zone.
Finally, Morocco has asserted its view that hydrogen belongs to strategies of green economic development, with the company attracting developers and planning pipelines to support the initiatives.