Daily digest market movers: Gold price rises despite upbeat US bond yields
- Gold price rallies above the round-level figure of $2,300, supported by weakness in the US Dollar. The US Dollar faces an intense sell-off as poor United States ISM Services PMI for March deepened uncertainty over the interest rate outlook.
- Fed policymakers have been reiterating that there is no urgency for rate cuts as they lack confidence that inflation will sustainably return to the desired rate of 2%. The strong US economic outlook and tight labor market conditions are keeping inflation pressures high. However, the weak US Services PMI report has cast some doubts over the US economy's resilience.
- The Services PMI surprisingly fell to 51.4 in March, missing expectations of 52.7 and below the former reading of 52.6. Subindexes such as New Orders and Prices Paid also fell sharply. The Services PMI gauges business activity in the service sector, which accounts for two-thirds of the US economy. A sharp decline in the Prices Paid measure indicates easing price pressures, while the decline in the New Orders index suggests slowing demand.
- Market expectations for the Fed pivoting to rate cuts in the June meeting have eased after Atlanta Fed President Raphael Bostic delivered hawkish guidance and Fed Chairman Jerome Powell reiterated the need for more data before pivoting to rate cuts.
- On Wednesday, Raphael Bostic said on CNBC he sees the central bank reducing interest rates only once in the last quarter this year. Bostic expects inflation to return to the 2% target in 2026. He added: "The economy is maintaining the strong momentum it has had."
- Jerome Powell maintained the baseline that rate cuts will start later this year only when policymakers have greater confidence that inflation is moving sustainably down. "Recent readings on both job gains and inflation have come in higher than expected," he said.
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