XAU/USD — Gold
Source: Bloomberg
What happened last week?
Last week, gold maintained its momentum on the bullish side due to the fall in treasury yields. Although yields continued to fall for the next two days, the yield curve started to flatten, with the 2-year yield rising above 0.52%, strengthening the US dollar and limiting the upside potential for gold.
In addition to this, on Thursday, 28 October 2021, the GDP was announced by the BEA and was not up to par with the forecast (2.0% vs 2.7%), leading to a fall in the US dollar. However, this was not for long as the economic data on initial jobless claims was favourable (281K vs 290K), retreating gold at around $1,800.17 high.
On 29 October 2021, gold slipped by around -$18.70 at $1,783.02 due to the rise in the US yields.
What’s next?
The ISM manufacturing PMI is scheduled for next week, followed by the FOMC meeting later in the week. If the policymakers adopt a hawkish approach, the US dollar will outperform, and gold could turn bearish in the near term. On the other hand, if the policymakers adopt a dovish approach, downplaying the inflation concerns and focusing on the fall in GDP (Q3) would create selling pressure on the dollar and allow gold to go up.
Initial jobless claims and Non-farm Payrolls are also scheduled for the week wherein a strong figure could support the US dollar and vice versa.
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EUR/USD
Source: Bloomberg
What happened last week?
Last week, the European Central Bank (ECB) kept its monetary policy unchanged. Despite inflationary concerns, the President of the ECB, Christine Lagarde, insisted that inflation is transitory and shall decrease next year. The GDP announcement (2.0% actual vs 2.7% forecast) cooled down the expectations for aggressive tapering in the US. The reason for the downfall was mainly attributed to slow consumer spending and supply chain concerns.
What’s next?
The US will be publishing the ISM manufacturing PMI on Monday, 1 November, 2021, with the forecast at 60.4 (the previous at 61.1). On Wednesday, 3 November, 2021, the country will publish the ADP Non-farm employment change, with the forecast being at 400k (the previous being at 568K), followed by the monetary policy decision undertaken by the US Federal Reserve. Also, the country will publish the Non-farm Payroll report with the forecast of around 397k new jobs (the previous being 194k).
On the other side, the EU calendar would focus on Retail sales (for September) and ECB’s President Lagarde speech.
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GBP/USD
Source: Bloomberg
What happened last week?
In the last week, the dollar struggled due to the GDP data (2.0% actual vs 2.7% forecast), and the yield curve that continued to fall started to flatten by the end of the week, allowing GBP/USD to improve despite the current Brexit issues.
What’s next?
The ISM Purchasing Manager Index is scheduled this week for the USD (60.4 Forecast vs 61.1 Previous). As the forecast is well above 60, it could reflect strong economic growth, the Non-farm Payroll report with the forecast of around 397k new jobs (previous being 194k). As mentioned earlier, a monetary policy decision will be undertaken by the Federal Reserve this week.
For GBP, the calendar would be focusing more on the upcoming inflation report and the interest rate decision by the Bank of England. However, the question is, will the Bank of England increase the rates?
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