The US dollar has increased by 1.5% during the last five trading days, and it continues to rise. Ahead of the release of US Retail Sales data, investors have lowered their expectations for the Feed rate decrease, causing the pair to reach its highest price in the mid-range of 0.8650.
Because of the pleasant weather, retail consumption is predicted to have climbed at a quicker rate of 0.4% in December. This will probably demonstrate that the US economy is still strong and that the Fed has to keep pushing for target inflation.
Further pressure is anticipated on the gold market (XAU/USD) as the US Census Bureau released robust retail sales statistics for December. Retail sales tickets were much higher by 0.6% at retail locations compared to the previous figure of 0.3% and the forecasts of 0.4%. Against forecasts and the previous estimate of 0.2%, retail sales excluding autos increased by 0.4%. This has considerably decreased the likelihood that the Fed would lower interest rates in March.
As hawkish remarks from Federal Reserve (Fed) Governor Christopher Waller raised doubts about a rate drop by the central bank during the March meeting, the precious metal continued its decline. Fed policymakers have been supporting longer-term increases in interest rates, going against what the market has been expecting, because they are not certain that inflation would return to the 2% target in a timely and sustainable manner.
The unexpectedly recalcitrant December consumer price inflation statistics for the United Kingdom had earlier spurred gains in the Cable. As expectations of an early rate cut by the Bank of England (BoE) have diminished due to increased pricing pressure, the GBP/USD pair recovers its losses. A considerable increase in oil costs and somewhat greater service inflation contributed to the Consumer Price Index (CPI) reporting higher than anticipated.
Because UK inflation is still quite high, BoE policymakers have more leeway to keep interest rates at the current level of 5.25% for an extended amount of time. BoE officials have been cautioning that since price pressures are far higher than the necessary rate of 2%, it is premature to talk about interest rate reductions.
Due to the inability of the monthly OPEC report to cause any changes, oil prices are still low for the remainder of this week and Wednesday. When you read at the study, it becomes even worse—OPEC talks about a deficit and a recovery in late 2025. This indicates that OPEC is giving up on 2024 and trying to hold onto the existing price levels because the current conditions do not allow for a price increase.