By FXEmpire.com
Analysis and Recommendations:
Gold traded up today, at 1599.95 adding 23.75. Yesterday’s late afternoon WSJ article by J. Hilsenrath’s helped to refocus markets on next Wednesday’s August 1st FOMC meeting. As laid out in Chair Bernanke’s report to the senate, there are three major risks to the US economy: 1) Europe; 2) the fiscal cliff; and 3) low growth, all of which appear to be deteriorating. In the same report Chair Bernanke focused on the tools available to the Fed should the loss in economic momentum endure. These include:
1) Communication – the Fed could push out its rate guidance into 2015.
2) Balance sheet – either another round of QE aimed at Treasuries and MBS or another form of yield curve measures, like operation twist.
3) Credit – whereby the discount window would be used not as an emergency tool, but instead to supply credit to banks in the hopes it would flow to the real economy. This would be along the lines of the BoE’s Funding for Lending program.
4) Interest on excess reserves – decreasing the IOER would follow in the ECB’s footsteps, but likely have a limited impact.
Traders expect the Fed will likely take advantage of the first three tools.
Gold almost paused overnight, as feeble economic releases kept hopes of further monetary easing while a strong dollar pressured prices. The latest figures showed that both U.S and European economies still struggle to make headway in July. Subsequent to a drop in manufacturing output, Euro zone business activity contracted again in July to the lowest level since March 2009. Greece is doubtful to pay its debts and further debt restructuring is likely to be necessary, commented EU officials. At the same time improved Chinese factory output shows that the stimulus measures initiated earlier provided some boost to economy. Looking ahead, investors will crucially watch the outcome of the Fed’s policy meeting on July 31 and Aug 1 for cues on further monetary easing program that could guide gold’s further direction. Physical demand from Asia remains lackluster while traders remain focused on anticipated marriage based demand from India in late August.
FxEmpire provides in-depth analysis for each currency and commodity we review. Fundamental analysis is provided in three components. We provide a detailed monthly analysis and forecast at the beginning of each month. Then we provide more up to the data analysis and information in our weekly reports.
Economic Data July 25, 2012 actual v. forecast
|
Date |
Currency |
Event |
Actual |
Forecast |
Previous |
|
Jul. 25 |
JPY |
Trade Balance |
-0.30T |
-0.39T |
-0.62T |
|
AUD |
CPI (QoQ) |
0.5% |
0.6% |
0.1% |
|
|
AUD |
Trimmed Mean CPI (QoQ) |
0.5% |
0.6% |
0.3% |
|
|
EUR |
German Ifo Business Climate Index |
103.3 |
104.7 |
105.2 |
|
|
EUR |
German Current Assessment |
111.6 |
113.0 |
113.9 |
|
|
EUR |
German Business Expectations |
95.6 |
96.7 |
97.2 |
|
|
GBP |
GDP (QoQ) |
-0.7% |
-0.2% |
-0.3% |
|
|
GBP |
GDP (YoY) |
-0.8% |
-0.3% |
-0.2% |
|
|
GBP |
CBI Industrial Trends Orders |
-6 |
-12 |
-11 |
|
|
USD |
New Home Sales |
372K |
369K |
Upcoming Economic Events that affect the CHF, EUR, GBP and USD
|
Date |
Time |
Currency |
Event |
Previous |
|
Jul 26 |
6:00 |
EUR |
5.8 |
|
|
8:00 |
EUR |
2.9% |
||
|
12:30 |
USD |
0.7% |
||
|
12:30 |
USD |
|||
|
14:00 |
USD |
5.9% |
||
|
Jul 27 |
27th-31st |
GBP |
-0.6% |
|
|
All Day |
EUR |
-0.1% |
||
|
7:00 |
CHF |
1.16 |
||
|
12:30 |
USD |
1.9% |
||
|
13:55 |
USD |
72.0 |
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Originally posted here
