USD: 3 Narratives Supporting A Stronger USD Into Year-End - ING
ING Research maintains a bullish bias on the USD over the coming weeks.
"Last week’s action in the FX market conveyed a clear message that it is too early to turn more structurally bearish on the dollar or bullish on pro-cyclical currencies. This week, markets may find further confirmation that this is the case, with a few key threads to follow.
First, US CPI figures on Thursday should show a decline (we estimate from 8.3% to 8.1%) in headline inflation caused primarily by lower gasoline prices, but at the same time an acceleration in the core rate (we estimate from 6.3% to 6.5%), mainly driven by housing costs and recreation prices," ING notes.
"Second, Fed communication. A 75bp hike for November and a 4.60-4.70% peak rate are now in the price, but additional hawkish comments – if backed by an inflation surprise for example – could encourage markets to speculate on larger hikes or a more prolonged tightening cycle.
Third, geopolitical and energy market developments. There have been signs over the weekend that any optimism over an imminent de-escalation in the Ukraine conflict may be misplaced.
A re-test of the 114.76 September high in DXY is our base case over the next few days," ING adds.
ING Research maintains a bullish bias on the USD over the coming weeks.
"Last week’s action in the FX market conveyed a clear message that it is too early to turn more structurally bearish on the dollar or bullish on pro-cyclical currencies. This week, markets may find further confirmation that this is the case, with a few key threads to follow.
First, US CPI figures on Thursday should show a decline (we estimate from 8.3% to 8.1%) in headline inflation caused primarily by lower gasoline prices, but at the same time an acceleration in the core rate (we estimate from 6.3% to 6.5%), mainly driven by housing costs and recreation prices," ING notes.
"Second, Fed communication. A 75bp hike for November and a 4.60-4.70% peak rate are now in the price, but additional hawkish comments – if backed by an inflation surprise for example – could encourage markets to speculate on larger hikes or a more prolonged tightening cycle.
Third, geopolitical and energy market developments. There have been signs over the weekend that any optimism over an imminent de-escalation in the Ukraine conflict may be misplaced.
A re-test of the 114.76 September high in DXY is our base case over the next few days," ING adds.
Three reasons to buy Gold now – UBS
Gold remains 8.2% higher since the start of this year, and economists at UBS think it is likely to break its all-time high later this year with multiple mid- to longer-term drivers.
1. Central bank demand should remain robust
“Central banks are on track to buy around 700 metric tons of Gold this year, much higher than the average since 2010 of below 500 metric tons. We think this trend of central bank buying is likely to continue amid heightened geopolitical risks and elevated inflation.”
2. Broad US Dollar weakness supports Gold
“The direction of a weakening USD is clear, we believe the reduction in US yield carry will continue to weigh on the greenback. Gold has historically performed well when the US Dollar softens due to their strong negative correlation, and we see another round of USD weakness over the next 6-12 months.”
3. Rising US recession risks may prompt safe-haven flows
“Recent data coming out of the US showed the country’s growth is slowing. Tighter credit conditions, evidenced by the Fed’s latest Senior Loan Officer Opinion Survey, are also likely to weigh on growth and corporate profits. Based on data since 1980, Gold’s relative performance versus the S&P 500 improved significantly during US recessions.”
Gold remains 8.2% higher since the start of this year, and economists at UBS think it is likely to break its all-time high later this year with multiple mid- to longer-term drivers.
1. Central bank demand should remain robust
“Central banks are on track to buy around 700 metric tons of Gold this year, much higher than the average since 2010 of below 500 metric tons. We think this trend of central bank buying is likely to continue amid heightened geopolitical risks and elevated inflation.”
2. Broad US Dollar weakness supports Gold
“The direction of a weakening USD is clear, we believe the reduction in US yield carry will continue to weigh on the greenback. Gold has historically performed well when the US Dollar softens due to their strong negative correlation, and we see another round of USD weakness over the next 6-12 months.”
3. Rising US recession risks may prompt safe-haven flows
“Recent data coming out of the US showed the country’s growth is slowing. Tighter credit conditions, evidenced by the Fed’s latest Senior Loan Officer Opinion Survey, are also likely to weigh on growth and corporate profits. Based on data since 1980, Gold’s relative performance versus the S&P 500 improved significantly during US recessions.”
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XAU/USD to see strength back to $1,968, then $2,063/2,075 record highs – Credit Suisse
Gold has achieved Credit Suise’s target/support zone at $1,900/1,890, and the bank looks for a floor here.
A weekly close below $1,862 would be seen to reinforce the longer-term sideways range.
Gold has achieved our target of price support and the 38.2% retracement of the 2022/2023 uptrend at $1,900/1,890. With the key rising 200-DMA seen not far below $1,862, our bias remains for a major floor to be found here.
We thus look for $1,862 to hold on a closing basis for strength back to the 55-DMA at $1,968 initially, then a retest of major resistance at the $2,063/2,075 record highs. We still stay biased to an eventual break to new record highs later in the year, which would then be seen to open the door to a move above $2,300.
A weekly close below $1,862 though would be seen to reinforce the longer-term sideways range, and a fall to support next at $1,810/05.
Gold has achieved Credit Suise’s target/support zone at $1,900/1,890, and the bank looks for a floor here.
A weekly close below $1,862 would be seen to reinforce the longer-term sideways range.
Gold has achieved our target of price support and the 38.2% retracement of the 2022/2023 uptrend at $1,900/1,890. With the key rising 200-DMA seen not far below $1,862, our bias remains for a major floor to be found here.
We thus look for $1,862 to hold on a closing basis for strength back to the 55-DMA at $1,968 initially, then a retest of major resistance at the $2,063/2,075 record highs. We still stay biased to an eventual break to new record highs later in the year, which would then be seen to open the door to a move above $2,300.
A weekly close below $1,862 though would be seen to reinforce the longer-term sideways range, and a fall to support next at $1,810/05.
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Gold is booming primarily due to escalating trade tensions between the U.S. and China, with the U.S. imposing tariffs of 145% on Chinese goods and China responding with 125% tariffs on U.S. imports—measures that have weakened the U.S. dollar and triggered a flight to safe-haven assets. At the same time, global central banks are ramping up gold purchases to diversify away from the dollar, boosting overall demand. Adding to this momentum are persistent geopolitical conflicts and inflation concerns, prompting investors to turn to gold as a hedge against economic uncertainty.
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Gold has surged to new highs amid persistent overnight buying from Asia, with volumes well above average. Goldman Sachs highlights that despite the rally, positioning is not yet stretched. Their bullish year-end forecast now stands at $3,700/oz, with a $4,500/oz tail-risk scenario under potential Fed policy shifts.
GBP/USD nears 1.3400 — its lowest in 3 weeks — as risk-off sentiment dominates amid escalating Middle East tensions and safe-haven demand boosts USD.
📰 Early optimism faded after Iran reportedly launched new missile and drone strikes, reinforcing USD strength.
📊 Ahead:
• UK CPI – Wednesday
• Fed decision – Wednesday
• BoE rate decision – Thursday (no change expected)
Stay sharp — high-impact volatility ahead.
📰 Early optimism faded after Iran reportedly launched new missile and drone strikes, reinforcing USD strength.
📊 Ahead:
• UK CPI – Wednesday
• Fed decision – Wednesday
• BoE rate decision – Thursday (no change expected)
Stay sharp — high-impact volatility ahead.
📈 Gold Fundamental Analysis
XAU/USD is holding firm above $3,300, supported by strong U.S. labor data — jobless claims hit 227K vs. 235K expected, signaling a resilient job market.
However, hopes for a July Fed rate cut are fading. High Treasury yields and a strong USD are limiting upside momentum.
📝 Fed Minutes: While some policymakers still favor a cut, most remain cautious due to inflation concerns, especially from new tariffs.
🇺🇸 President Trump has imposed 50% tariffs on Brazil, adding to global uncertainty and keeping safe-haven demand for gold intact.
📊 ETF Flows: Gold ETFs recorded the largest inflow since Aug 2022, with $38B added in H1 and holdings rising by ~397 tons, reflecting solid investor interest.
📌 I think Gold remains stable but range‑bound. Key drivers: labor data, yields, Fed stance, and geopolitics. Watch the $3,282–$3,345 range for breakout or rejection signals.
XAU/USD is holding firm above $3,300, supported by strong U.S. labor data — jobless claims hit 227K vs. 235K expected, signaling a resilient job market.
However, hopes for a July Fed rate cut are fading. High Treasury yields and a strong USD are limiting upside momentum.
📝 Fed Minutes: While some policymakers still favor a cut, most remain cautious due to inflation concerns, especially from new tariffs.
🇺🇸 President Trump has imposed 50% tariffs on Brazil, adding to global uncertainty and keeping safe-haven demand for gold intact.
📊 ETF Flows: Gold ETFs recorded the largest inflow since Aug 2022, with $38B added in H1 and holdings rising by ~397 tons, reflecting solid investor interest.
📌 I think Gold remains stable but range‑bound. Key drivers: labor data, yields, Fed stance, and geopolitics. Watch the $3,282–$3,345 range for breakout or rejection signals.
🚨 Trump Reportedly Weighs Firing Fed Chair Powell
According to a CBS News report citing multiple sources, former US President Donald Trump asked GOP lawmakers in a recent Oval Office meeting whether he should fire Federal Reserve Chairman Jerome Powell.
Several attendees indicated that Trump appears likely to go through with it.
💥 Market Reaction: The US Dollar weakened sharply following the news. The USD Index (DXY) dropped 0.55%, currently trading near 98.10.
According to a CBS News report citing multiple sources, former US President Donald Trump asked GOP lawmakers in a recent Oval Office meeting whether he should fire Federal Reserve Chairman Jerome Powell.
Several attendees indicated that Trump appears likely to go through with it.
💥 Market Reaction: The US Dollar weakened sharply following the news. The USD Index (DXY) dropped 0.55%, currently trading near 98.10.
🟡 GOLD (XAU/USD) Market Update
Gold is trying to break above the $3,378 level.
If successful, we may see a move towards the psychological level of $3,400,
followed by the next resistance at $3,451.
Key Drivers:
🔸 Gold price rises to around $3,374 due to mild USD correction
🔸 Traders reduce Fed rate cut expectations after June CPI report
🔸 Trump’s tariffs are starting to impact the US economy
📊 Keep an eye on price action — a breakout could lead to strong bullish momentum.
Gold is trying to break above the $3,378 level.
If successful, we may see a move towards the psychological level of $3,400,
followed by the next resistance at $3,451.
Key Drivers:
🔸 Gold price rises to around $3,374 due to mild USD correction
🔸 Traders reduce Fed rate cut expectations after June CPI report
🔸 Trump’s tariffs are starting to impact the US economy
📊 Keep an eye on price action — a breakout could lead to strong bullish momentum.
📊 Gold (XAU/USD) Analysis
Gold showed a slight recovery after dipping to a nearly 3-week low, supported by safe-haven demand. However, the momentum still lacks strong bullish conviction ahead of the FOMC Minutes.
Key points to note:
🔹 Diminishing odds of a jumbo Fed rate cut are keeping the USD firm, which could limit gold’s upside.
🔹 Ongoing Russia-Ukraine peace hopes may also act as a headwind for XAU/USD.
📉 Personally, I see the market leaning towards bearish pressure soon unless we get a strong fundamental shift.
On Wednesday, the market closed at $3348.
Stay cautious — volatility may increase around FOMC updates! ⚡️
Gold showed a slight recovery after dipping to a nearly 3-week low, supported by safe-haven demand. However, the momentum still lacks strong bullish conviction ahead of the FOMC Minutes.
Key points to note:
🔹 Diminishing odds of a jumbo Fed rate cut are keeping the USD firm, which could limit gold’s upside.
🔹 Ongoing Russia-Ukraine peace hopes may also act as a headwind for XAU/USD.
📉 Personally, I see the market leaning towards bearish pressure soon unless we get a strong fundamental shift.
On Wednesday, the market closed at $3348.
Stay cautious — volatility may increase around FOMC updates! ⚡️
📊 GBP/USD Quick Outlook
USD started the week strong ahead of Powell’s Jackson Hole speech. Markets trimmed Fed cut bets to ~52 bps for 2025.
UK CPI jumped to 3.8% (vs 3.6%), keeping BoE under pressure with sticky inflation.
GBP/USD trades near 1.3480, recovering after early USD strength.
Focus next: Fed Minutes + Powell’s tone. If Wall Street stays bullish, pair may push higher.
⚡️ Bias: Short-term bullish above 1.3500, but Fed signals will set the direction.
USD started the week strong ahead of Powell’s Jackson Hole speech. Markets trimmed Fed cut bets to ~52 bps for 2025.
UK CPI jumped to 3.8% (vs 3.6%), keeping BoE under pressure with sticky inflation.
GBP/USD trades near 1.3480, recovering after early USD strength.
Focus next: Fed Minutes + Powell’s tone. If Wall Street stays bullish, pair may push higher.
⚡️ Bias: Short-term bullish above 1.3500, but Fed signals will set the direction.
📊 USD Outlook – Jackson Hole in Focus
Fed Chair Powell speaks Friday at 14:00 GMT on the economic outlook & policy framework. Markets are bracing for high volatility in USD pairs.
Background: Fed kept rates at 4.25–4.50% in July. Two governors dissented, favoring a cut. Jobs data showed weakness (July NFP +73k, big revisions lower), but inflation remains sticky.
Market Odds: CME shows ~47% chance of 50 bps cuts this year, ~33% chance of 75 bps cuts.
Scenarios:
🔻 If Powell highlights labor market weakness → USD could sell off.
🔺 If he stresses inflation risks → USD could strengthen.
⚡️ Bias: Two-way risk. Expect spikes in EUR/USD, GBP/USD, XAU/USD during/after Powell’s speech. Traders should be cautious with exposure.
Fed Chair Powell speaks Friday at 14:00 GMT on the economic outlook & policy framework. Markets are bracing for high volatility in USD pairs.
Background: Fed kept rates at 4.25–4.50% in July. Two governors dissented, favoring a cut. Jobs data showed weakness (July NFP +73k, big revisions lower), but inflation remains sticky.
Market Odds: CME shows ~47% chance of 50 bps cuts this year, ~33% chance of 75 bps cuts.
Scenarios:
🔻 If Powell highlights labor market weakness → USD could sell off.
🔺 If he stresses inflation risks → USD could strengthen.
⚡️ Bias: Two-way risk. Expect spikes in EUR/USD, GBP/USD, XAU/USD during/after Powell’s speech. Traders should be cautious with exposure.
📊 Market Reaction – Powell Goes Dovish
Fed Chair Powell’s Jackson Hole speech sparked a USD sell-off as he warned: “Downside risks to the labor market are rising.” Markets now price in 90% odds of a September cut.
EUR/USD 🚀 jumped above 1.1700, hitting 1.1732
GBP/USD 📈 rallied past 1.3540 as easing cycle bets strengthened.
XAU/USD 🟡 surged above $3,370, gaining on lower rate expectations.
Powell balanced inflation concerns (tariffs = one-time effect) with softer jobs data, hinting that policy recalibration is near.
⚡️ Bias: USD bearish momentum likely to continue short-term. Watch EUR/USD 1.1730, GBP/USD 1.3550, and Gold $3,380 as next resistance zones.
Fed Chair Powell’s Jackson Hole speech sparked a USD sell-off as he warned: “Downside risks to the labor market are rising.” Markets now price in 90% odds of a September cut.
EUR/USD 🚀 jumped above 1.1700, hitting 1.1732
GBP/USD 📈 rallied past 1.3540 as easing cycle bets strengthened.
XAU/USD 🟡 surged above $3,370, gaining on lower rate expectations.
Powell balanced inflation concerns (tariffs = one-time effect) with softer jobs data, hinting that policy recalibration is near.
⚡️ Bias: USD bearish momentum likely to continue short-term. Watch EUR/USD 1.1730, GBP/USD 1.3550, and Gold $3,380 as next resistance zones.