There is some downside correction in gold despite the risk-off trading mood. The price of an ounce eased to $1625, after Monday’s advance to
$1691. Yet buyers continue piling into gold at price retreats to hedge the risk of a deeper equity sell-off.
The rush into US government bonds continue. The US 10-year yield eased to 1.36% on mounting expectation of a Federal Reserve (Fed) intervention to stop the panic in the equity space. According to the activity on US sovereign bonds market, the probability of a Fed rate cut advanced to 27.7% in 18 March FOMC meeting. There is still room for a further development of dovish bets. Hence, the US dollar is giving back last week’s gains and there is room for further weakness in greenback. The US dollar index is now testing the 99 mark to the downside.
The euro is better bid against a broadly softer US dollar. The EURUSD is challenging the solid 1.0880/1.0900 offers. If cleared, the single currency could extend gains toward 1.0950, the major 38.2% Fibonacci retracement on December – February fall. Below this level, the pair will remain in the bearish trend and advances could present interesting top selling opportunities. An advance above the 1.0950 should signal a medium-term bullish reversal and give a further boost the single currency toward the 1.10 psychological mark.
Sterling shot up to 1.30 against the US dollar. The weak dollar is the major driver of the upside move in Cable, and a further dollar weakness could keep the pound in demand between 1.30 and 1.31 range.
By Ipek Ozkardeskaya