Gold prices fall marginally today in futures trade

Daniel Fowler
January 10, 2019

The dollar index stood near 2-1/2-month lows as investors grew increasingly convinced that the Federal Reserve will not raise interest rates this year amid uncertainties over the USA economy.

Fed Chairman Jerome Powell said on Friday that policy is flexible and officials are "listening carefully" to financial markets. It dipped 0.1 per cent against the yen and eased marginally versus the euro and sterling in early Asian trade. When the central bank announced a 57 percent jump in reserves to 53.3 million ounces in July 2015, it was the first update in six years. Japan's Nikkei reversed Friday's plunge to gain 2.4 percent.

"Market sentiment has improved", said Gao Qi, a strategist at Scotiabank.

Asian markets rallied Monday after a blockbuster performance on Wall Street as USA jobs data beat forecasts and the head of the Federal Reserve hinted at a slower pace of interest rate hikes.

Notwithstanding strong monthly data for December last week, market watchers believe the world's biggest economy is losing momentum with Federal Reserve chair Jerome Powell's comments adding to expectations the central bank may adopt a more cautious outlook.

The US dollar had gained 4.3 per cent in 2018 as the Fed hiked rates four times on the back of a strong domestic economy, falling unemployment and rising wage pressures.

However, few analysts still see scope for the Fed to raise rated in 2019.

"With the Fed only looking to pause rate hikes, the market is likely to have gotten ahead of itself in pushing at the United States 2-year and 10-year bond yields below the Fed Funds Rate last week", he added.

The U.S. dollar index, which measures the greenback's strength against a basket of six major currencies, was down 0.43% to 95.33, the weakest level since October 22. The move frees up $116 billion for new lending as it tries to reduce the risk of a pronounced fall in the pace of economic growth.

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U.S. officials are meeting their counterparts in Beijing this week for the first face-to-face talks since U.S. President Donald Trump and Chinese President Xi Jinping agreed in December to a 90-day truce in a trade war that has roiled global markets.

The size of the cut was at the upper end of market expectations, and the net funds released would be the largest amount in the five reserve requirement reductions since January 2018.

Goldman Sachs researchers expect a bounce in equity markets in 2019.

The euro was fetching US$1.1478, gaining 0.05 percent.

European stocks were more or less flat across the board, though mining stocks surged 1.1 percent after the reserve requirement ratio cut from China boosted metals prices, especially steel and iron ore.

The two sides have until March 1 to make a deal, after which Trump has pledged to ramp up tariffs to 25 percent, from 10 percent, on $200 billion worth of Chinese imports.

Elsewhere, the Australian dollar was lower by 0.07 per cent at US$0.7141.

Shanghai blue chips rose 0.3 percent, having already climbed over 2 percent on Friday.

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