The Fed kept rates unchanged while also trimming hopes for a March cut, and this weighed on the commodities complex yesterday. Meanwhile, a bearish weekly oil inventory report from EIA added to the downward pressure on the oil market. Energy – Crude Oil retreats Crude oil prices retreated sharply yesterday amid broader negative sentiment in the market after the Federal Reserve left rates unchanged and dashed hopes for a rate cut anytime soon. ICE Brent front-month contract has been trading at around US$80.2/bbl as of the time of writing, down around 5% since making its peak earlier in the week. The EIA weekly oil report was somewhat bearish for oil prices. US commercial crude oil inventories increased by 1.2MMbbls for the week ended on 26 January, the first increase in over three weeks. The market was anticipating a drawdown of around 0.2MMbbls, while API reported a decline of 2.5MMbbls. However, when factoring in the SPR releases, the build was even larger, with total US crude oil inventories increasing by around 2.1MMbbls. Total US commercial crude oil stocks now stand at 422MMbbls, still around 5% below the five-year average. The unexpected build in the stocks could be largely attributed to the slowing refinery operations due to lingering winter storm outages and planned refinery maintenance. Refinery operating rates in the country continued to decline and dropped by 2.6% over the week to 82.9% as of 26 January. As for refined product inventories, gasoline inventories increased by 1.16Mbbls, against a forecast for an addition of 2.34MMbbls. Distillate stockpiles fell by 2.54MMbbls last week, compared with expectations for a drawdown of 347Mbbls. A Reuters survey showed that OPEC output dropped by a sharp 410Mbbls/d over January to 26.33MMbbls/d as Libya faced disruption at one of its major oil fields, whilst some other countries also lowered production for the month. However, output is still higher than OPEC's targeted levels as some countries including Iraq, Nigeria and Gabon pump more than the agreed quota. Metals – LME aluminium cancelled warrants rise Gold held steady while industrial metals edged lower this morning as the latest comments from the Federal Reserve dashed hopes of an interest rate cut in March. Meanwhile, base metals were further pressurised on slowing demand concerns in China ahead of the Lunar New Year holiday next weekend. LME data shows that cancelled warrants for aluminium jumped 17,575 tonnes (the biggest daily addition since 9 January) for a second consecutive day to 219,000 tonnes as of yesterday, the highest since 21 December. The increase was driven by warehouses in Kaohsiung Port, Taiwan. Aluminium on-warrant inventories fell by 17,825 tonnes for a second straight session to 318,575 tonnes, while exchange inventories fell by 250 tonnes for a third consecutive day to 537,575 tonnes as of yesterday. Net inventories outflows for the January month stood at 11,475 tonnes, compared to the net inflows of 89,675 tonnes seen in December last year. As for copper, the latest data from the National Statistics Institute of Chile shows that domestic copper output increased 11.4% month-on-month (flat compared to year-ago levels) at 495.5kt in December driven by strong growth in the manufacturing and mining sectors. Meanwhile, cumulative copper output continued to remain weak and fell 1.7% year-on-year to 5.27mt in the whole of 2023, due to a series of operational issues this year. In zinc, recent reports suggest that Boliden plans to slash operations and reduce output at its Tara zinc mine in Australia when it restarts this year. Earlier in June, the mine was put on care and maintenance when the zinc prices touched three-year lows. Boliden plans to resume the mine operations in the second quarter of this year, with new conditions which include a one-week closure for the mill every three weeks and a production target of 180kt of zinc concentrates a year. Tara is Europe's largest zinc mine, with zinc concentrate output at more than 300ktpa when operating at its peak. Agriculture – ISMA revises sugar output estimates Recent estimates from the Indian Sugar Mills Association (ISMA) show that gross sugar production (including sugar diverted for ethanol production) in India could rise to 33.05mt in 2023/24, compared to its previous forecast of 32.5mt. However, it is lower than the 36.6mt produced for the last year. Sugar production after ethanol diversion is expected to fall to 31.4mt in 2023/24 when compared to 32.82mt produced a year earlier. Sugar allocation for ethanol production stood around 1.7mt for the 2023/24 season, while ISMA expects the government to allow the diversion of around 1.8mt of sugar this year. Sugar consumption in the nation is expected to average around 28.5mt this year. Meanwhile, 2023/24 ending stock estimates for the nation rose to 8.45mt, compared to 5.6mt a year ago. The group added that around 520 mills were crushing cane as of January...

EUR/USD trades slightly below 1.0800 in the European morning on Thursday. The US Dollar continues to gather strength following the Fed policy announcements. January inflation report from the Euro area and mid-tier US data releases will be watched closely. EUR/USD made sharp moves in both directions in the American session on Wednesday before closing the day marginally lower. The pair stays under modest bearish pressure early Thursday and trades below 1.0800 in the European morning.

Gold price looks to revisit two-week highs above $2,050 early Thursday. US Dollar and Treasury bond yields look to US jobs data after the hawkish Fed.    Gold price confirmed a triangle breakout amid a bullish daily RSI. Gold price is back in the green, on its way to retest the two-week high of $2,056 set on Wednesday. The US Dollar (USD) is fading its uptick amid a renewed appetite for risk assets, as markets cheer China's fiscal support while assessing the US Federal Reserve (Fed) interest rate outlook. Gold price regains poise, as focus shifts to US jobs data China's Vice Finance Minister Wang Dongwei announced on Thursday that they "will appropriately increase investment under the central government budget", which "will help expand domestic demand." This comes after China's Caixin Manufacturing Purchasing Managers Index (PMI) remained at 50.8 in January, suggesting a steady growth in the country's manufacturing sector. The market consensus was for a 50.6 reading. The further boost to risk sentiment in Asia faded the uptick in the US Dollar, motivating Gold buyers to regain control. Additionally, the persistent weakness in the US Treasury bond yields across the curve is also helping the non-yielding Gold price to recover lost ground. US Treasury bond yields came under the bus on Wednesday and smashed the US Dollar alongside after the ADP Employment Change data came in below estimates at 107K and following the Treasury Department's quarterly announcement that it would sell $121 billion in notes and bonds next week, up from $112 billion last quarter.  However, a relatively hawkish tone delivered by the Fed, following the conclusion of its two-day policy meeting, failed to offer any respite to the US Treasury bond yields while the US Dollar jumped on the Fed's pushback against a March rate cut. The US central bank extended the pause, as Fed Chair Jerome Powell said "based on the meeting today, I don't think likely we will have a rate cut in March." Markets are currently pricing in a 35% probability that the Fed will cut rates in March while for May the odds stand at 92%. All eyes now turn toward Friday's US Nonfarm Payrolls data to affirm the pushback to May for the Fed to lower the interest rates. Ahead of that, traders will look to the US Jobless Claims, Unit Labor Cost (Q4) and the ISM Manufacturing PMI data for fresh trading impetus in Gold price. The upcoming data could help reprice the market's expectations for the dovish Fed pivot. Gold price technical analysis: Daily chart As observed on the daily chart, Gold price confirmed an upside break from a month-long symmetrical triangle formation after closing convincingly above the falling trendline resistance at $2,036 on Wednesday. The 14-day Relative Strength Index (RSI) indicator points north above the midline, suggesting that there is enough room for the upside. Traders have paid little attention to the Bear Cross validated on Tuesday after the 21-day Simple Moving Average (SMA) crossed the 50-day SMA from above on a daily closing. With the bullish bias likely intact in Gold price, the immediate strong resistance is seen at the previous day's high of $2,056, above which the December 12 high of 2,062 wil be tested. Further up, the $2,070 round figure could challenge bearish commitments. On the downside, powerful support continues to remain at the $2,030 region, where the 21- and 50-day Simple Moving Averages (SMA) hang around. Acceptance below the latter could reinforce the selling interest for a test of the triangle support at $2,016. If the downside momentum gains traction, a test of the key $2,000 threshold could be in the offing.  

The Fed maintained its monetary policy unchanged, as widely expected. Powell signalled optimism on inflation but pushed back on March cut. We still stick to our call for a first cut in the next meeting, and will focus on labour supply and leading growth data during the intermeeting period. Phasing out QT will also be discussed more in-depth in March, no new signals today. EUR/USD price action around the FOMC meeting should be viewed in light of the drop in US rates following renewed concerns about the health of US regional banks. In the end, EUR/USD finished close to the 1.08 level and about flat on the day, we still look for 1.07 in 6M and 1.05 in 12M. The Fed remains firmly 'in a risk management mode' as it continues to make progress on both sides of the dual mandate. Powell struck an optimistic tone on inflation, stating that data seen so far has been 'good enough' and that the Fed simply needs to see more similar evidence on disinflation in order to initiate the cutting cycle. There are two-sided risks to starting either too late or too early, but the cuts are ultimately on the way in any case. We stick to our call for a first cut in March followed by gradual quarterly reductions thereafter, as we think the approach still fits well with the Fed's risk management stance. Market prices in around 35% probability for the March cut. What would be needed for the Fed to opt for a cut already in the next meeting? Powell continued to emphasize recovering labour supply as a key factor balancing the labour market. The flow of workers from outside the labour force and into employment slowed abruptly in December (Chart 1), and we will see if the tide turned higher again in the Friday's Jobs Report. Powell was confident that housing inflation would continue to slow down as past moderation in rental price growth feeds into the official measures. According to the NY Fed's Multivariate Core estimate, sector-specific housing is clearly the most important contributor to underlying inflation, while other factors have already eased markedly, suggesting that further positive news on inflation might be on the way. We will also closely follow early indicators for growth. The uptick in January Flash PMIs rhymed well with the late-2023 easing in financial conditions, recovery in household real incomes and also Powell's comments on anecdotal evidence. That said, some regional manufacturing indices have flashed downside risks ahead of the ISM release tomorrow. On the balance sheet, Powell gave no concrete signals on the timing of QT endgame, and simply stated that the issue would be discussed more in detail in the next meeting. We still think that QT will likely continue at least until the end of 2024. EUR/USD price action around the FOMC meeting should be viewed in light of the rally ahead of the meeting triggered by renewed concerns about the health of US regional banks. In the end, EUR/USD finished close to the 1.08 level and about flat on the day as the market and the Fed remain undecided on the prospects of a cut in March. We keep our forecasts for EUR/USD unchanged at 1.07 on 6M and 1.05 on 12M.   Download the Full Report!

AUD/USD maintained the range bound trade unchanged. Disinflationary pressures gathered pace in the last part of 2023. The Federal Reserve left its monetary conditions intact, as expected. Once again, AUD/USD demonstrated volatile performance on Wednesday, remaining trapped in a side-lined theme that has persisted since the middle of this month. Following an initially auspicious start to the week, the Aussie dollar charted slight gains on a daily basis, always around the 0.6600 neighbourhood and aligning with the marked losses observed in the greenback. Meanwhile, the resilience of the Australian currency is noteworthy, especially given recent reports indicating potential additional stimulus measures by the PBoC to support China's stock market and foster economic recovery post-pandemic. Speaking about China, slightly positive results from the Manufacturing and Non-Manufacturing PMIs tracked by NBS for the month of January seem to have lent some legs to AUD, limiting the downside potential at the same time. On another front, the anticipated decision of the Reserve Bank of Australia (RBA) to maintain its current policy stance at its February 6 meeting is seen as a factor restricting the potential upward movement of the pair in the near term, likely leading to subdued trading in the short-term future. Underpinning this prospect, the latest inflation data in Australia showed that disinflationary pressures gathered extra steam towards the end of last year; both the Inflation Rate and the RBA's Monthly CPI Indicator rose (much) less than initially estimated by 4.1% in Q4 and by 3.4% in December, respectively. Collaborating with the pair's price action also emerged the key FOMC event, where the Federal Reserve matched the broad consensus and left its interest rates intact early on Wednesday. The greenback gathered pace and kept the downside pressure on the Aussie dollar after the Committee showed no rush to reduce its rates, as it needs further evidence that inflation is heading towards the bank's goal, at the time when Chair Powell almost ruled out an interest rate cut in March. A glimpse at the Australian docket notes that preliminary readings for Building Permits for the month of December are only due on Thursday. AUD/USD daily chart AUD/USD short-term technical outlook Further losses may cause the AUD/USD to retest its 2024 low of 0.6524 (January 17), which appears reinforced by the provisional 100-day SMA (0.6528) and by the December 2023 bottom. Extra weakness from here could put a probable visit to the 2023 low of 0.6270 (October 26) back on the radar ahead of the round level of 0.6200, all of which precede the 2022 low of 0.6169 (October 13). On the contrary, there is a temporary barrier at the 55-day SMA of 0.6644. The breakout of this zone may motivate the pair to set sails for the December 2023 high of 0.6871 (December 28), ahead of the July 2023 top of 0.6894 (July 14) and the June 2023 peak of 0.6899 (June 16), all preceding the key 0.7000 yardstick. No changes to the consolidative phase are seen on the 4-hour chart. On the bullish side, there is an immediate hurdle at 0.6624 ahead of the 200-SMA at 0.6684. The surpassing of this zone indicates a potential advance to 0.6728. On the flip side, there is initial support around 0.6551 before 0.6525. If this zone is breached, there is no significant dispute until 0.6452. The MACD remains flat around the positive line, and the RSI leaps past 52. View Live Chart for the AUD/USD

The Federal Reserve has left interest rates unchanged and removed language about further hikes.  Officials signaled rate cuts are not imminent, a hawkish twist. Investors are set to focus on data showing a slowdown, reversing the initial response. Markets do not like uncertainty – or the lack of confidence, which the Federal Reserve (Fed) has expressed. A deeper look at the bank's pushback reveals its weakness and could trigger a reversal. The Fed removed the part indicating further rate hikes may be needed, but that was obvious for months. Its last tightening came in July, and the December decision already included a major downgrade in expectations for further hikes. The "dot plot" indicated more cuts than they had previously forecast.  Yet removing the open door to hiking was balanced by a pushback against immediate hikes. Here is the critical passage: The Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent The understatement is that officials cannot be confident that inflation is falling. Is this the case? According to the Fed's preferred inflation calculation, PCE, headline price rises slowed to 2.6%, while Core PCE is at 2.9%. This is within striking distance of the bank's goal of 2%.  More importantly, the Fed reiterates that it is data dependent, and there is plenty of data until March 20 – the next FOMC meeting. Another retreat in inflation may be sufficient to justify a rate cut. Moreover, the labor market is cooling, and if it suffers a cold, the Fed would slash rates instantly. Rising unemployment is undesirable.  I expect markets to act earlier. The pushback against cutting rates in March is only a slap on the wrist – not fully forced. The bank cannot commit to leaving rates unchanged in seven weeks from now, as anything and everything can change. All in all, markets respect the bank's hawkishness, but it will soon find the confidence Powell seems to lack – inflation and employment are cooling. That means expectations for lower rates, thus sending stocks and Gold back up, and the US Dollar down. 

XAU/USD Current price: 2,050.48 The US Dollar came under strong selling pressure following signs of easing price pressures. The United States Federal Reserve will soon announce its decision on monetary policy. XAU/USD trades near a fresh two-week high, aims to extend gains in the near term. The US Dollar is under strong selling pressure as the Federal Reserve's (Fed) monetary policy decision approaches, with XAU/USD advancing beyond $2,050 a troy ounce. The Greenback slid after the release of United States (US) employment-related figures, signaling inflationary pressures eased further. On the one hand, the ADP National Employment Report showed that the private sector added 107K new positions in January, below the market expectations. ADP Chief Economist Nela Richardson noted: "Progress on inflation has brightened the economic picture despite a slowdown in hiring and pay," adding that "the economy looks like it's headed toward a soft landing in the US and globally." At the same time, the country released the Q4 Employment Cost Index, which showed wages and benefits increased 0.9% in the three months to December, down from 1.1% in the previous quarter and the smallest advance in over two years. Government bond yields plunged with the news, with the 10-year Treasury note offering  3.95% and the 2-year note yielding 4.12%,  shedding over 10 basic points (bps) each. The focus shifts now to the Fed. The central bank will shortly announce its decision on monetary policy, which is widely expected to remain unchanged. Ahead of the event, investors are pricing in a 60% chance of a rate cut in March and will be looking for confirmation despite Chair Jerome Powell likely refraining from providing a specific date. The US Dollar may come under additional selling pressure if Powell's words are seen as dovish.   XAU/USD short-term technical outlook The XAU/USD pair keeps gaining bullish traction, trading near a fresh two-week high. Technical readings in the daily chart favor another leg north, as the bright metal extends its recovery above a now flat 20 Simple Moving Average (SMA), while the longer ones slowly gain upward traction far below the current level. Finally, technical indicators advance within positive levels for the first time this year. The 4-hour chart also favors the upside. Technical indicators turned higher and maintain their upward momentum well into positive ground. Furthermore, XAU/USD run past all its moving averages, while the 20 SMA crossed above a flat 100 SMA, both below and also bullish 200 SMA. Support levels: 2,038.90 2,022.60 2,007.20 Resistance levels: 2,056.10 2,071.30 2,085.40

EUR/USD Current price: 1.0846 Germany reported the Harmonized Index of Consumer Prices eased by more than anticipated in January. The United States ADP survey showed the private sector added 107K new jobs in January, worse than expected. EUR/USD is technically bearish and could accelerate south on a break through 1.0800. Financial markets are on pause this Wednesday, with EUR/USD changing hands around the 1.0840 level and confined to a tight intraday range, ahead of the United States (US) Federal Reserve's (Fed) monetary policy announcement. The Federal Open Market Committee (FOMC) surprised investors in December by anticipating three rate cuts for 2024. At the same time, however, policymakers were reluctant to provide clearer clues on the extent and timing of such rate cuts. Financial markets are pretty convinced the Fed will pull the trigger next March, delivering a 25 basis points (bps) rate cut, despite officials arduously trying to cool down such hopes. The FOMC is widely anticipated to maintain its monetary policy unchanged, with the focus on Chair Jerome Powell's words. In the press conference, Powell will likely avoid giving markets what they want, that is, a certain date for the first rate cut. Meanwhile, data coming from the Eurozone failed to impress. Germany reported that Retail Sales were down 1.6% MoM in December, worse than anticipated, although the January Unemployment Rate improved in January to 5.8% from 5.9% previously. The country also released the preliminary estimate of the Harmonized Index of Consumer Prices (HICP), which rose 3.1% YoY in January, easing from the previous 3.8%. Across the pond, the US published the ADP survey on private job creation, showing the country added  107K new positions in January,  much worse than the 145K anticipated by market players. December figure was downwardly revised to 158K from 164K previously reported. With the Fed in the way, EUR/USD showed no reaction to the news.   EUR/USD short-term technical outlook From a technical point of view, the EUR/USD pair is biased lower. The pair is seesawing around a flat 200 Simple Moving Average (SMA) in the daily chart, while the 20 SMA maintains its bearish slope above the current level, providing dynamic resistance at around 1.0900. At the same time, technical indicators head south within negative levels, although with uneven strength. In the near term, and according to the 4-hour chart, EUR/USD is neutral. The pair is currently developing around a flat 20 SMA, while the longer moving averages head lower far above the current level. Technical indicators, in the meantime, turned higher, but are currently struggling to overcome their midlines, limiting the bullish potential. Support levels: 1.0800 1.0760 1.0720 Resistance levels: 1.0900 1.0945 1.0990

EUR/USD holds above 1.0800 in the European morning on Wednesday. The Federal Reserve is expected to leave its policy settings unchanged. Market positioning suggests that there is room for further USD strength in case of a hawkish Fed surprise. After fluctuating in a tight channel above 1.0800 on Tuesday, EUR/USD closed the day marginally higher. With the US Dollar (USD) staying resilient against its rivals early Wednesday, however, the pair is finding it difficult to extend its recovery.  Slightly better-than-expected growth figures from the Eurozone area helped the Euro find a foothold on Tuesday. Additionally, European Central Bank (ECB) President Christine Lagarde reiterated that they would need to be further into the disinflationary process before cutting the rates, supporting the currency.

Markets Wednesday presents a busy, potentially massively volatile, and market-moving session with the FOMC meeting and the U.S. refunding on tap.  With the Treasury Department's consistent efforts to push down yields evident in its quarterly refunding announcements, investors will focus on whether the Treasury refunding estimates will be adjusted lower based on the recent forthcoming supply alterations published on Monday.  As for the FOMC meeting, while the Fed is not anticipated to endorse a rate cut in March, the primary question surrounds whether such early rate cut discussions are being entertained, which should be the primary market-moving focal point during the press conference. Indeed, it's poised to be a blockbuster day as Chair Powell has the potential to endorse or push back current market bullish dynamics and ebullient investor sentiment. Are you kidding me? With so many potentially market-moving events, it will be a hair-raising Wicked Wednesday, so buckle in.  Regarding market performance, stock indexes experienced a mixed day, with the Nasdaq Composite declining by 0.8%, partially offsetting the previous day's substantial gains. The S&P 500 concluded the day with a modest decline of 0.1%. However, the Dow Jones Industrial Average registered an uptick of 0.4%, equivalent to 134 points. These movements indicate a varied trading session characterized by fluctuations across different equity market segments.  As we transition into Aisa trading, investors remain attentive to the forthcoming guidance from the Federal Reserve as they navigate evolving market conditions and anticipate potential shifts in monetary policy. The house of saud Saudi Arabia's decision to abandon plans to increase its oil production capacity to 13 million barrels per day (mb/d) by 2027 carries significant implications for global oil markets. Still, the full extent of these implications remains uncertain. The recent directive, announced through a concise press release, represents a notable reversal compared to the rhetoric espoused by CEO Amin Nasser in March 2020. At that time, the plan to increase the Kingdom's maximum sustainable capacity was revealed amid a short-lived and highly ill-timed price war with Russia. Nasser's declaration nearly four years ago emphasized Aramco's commitment to exerting maximum effort to boost capacity as swiftly as possible. The proposed increase would have marked the first capacity expansion in at least a decade, albeit at a considerable expense. Saudi Arabia faces deficits projected through 2026 as Mohammed bin Salman pursues ambitious spending across various sectors in what many think are flights of fancy. But it is still hard to escape the notion that pertinent questions are being raised about their outlook on the long-term demand for oil within the House of Saud. And their decision may reflect broader trends in the global oil market dynamics. Factors such as evolving energy transition policies, growing renewable energy investments, and climate change concerns could influence Saudi Arabia's strategic decisions regarding oil production capacity. The decision to abandon capacity expansion plans underscores pressing questions about OPEC+'s ability to influence prices upward, especially amidst surging U.S. production and uncertainties surrounding Chinese demand. The Saudis, in particular, require oil prices around $100 per barrel to meet their fiscal requirements, underscoring the complexities and challenges facing global oil markets in the foreseeable future. Oil markets Following a day of choppy trading, traders are on edge awaiting a response from the United States to a deadly drone attack on a military outpost in Jordan. The Biden administration is carefully weighing its options on how to retaliate against Iran-backed militias without escalating tensions in the already volatile Middle East region. John Kirby, Coordinator for Strategic Communications for the National Security Council, indicated to reporters aboard Air Force One on Tuesday that the United States is contemplating a "tiered approach, not a single action, but essentially multiple actions" in response to Sunday's attack on a U.S. military base. The attack resulted in the death of three service members and left dozens injured. Notably, there have been over 159 attacks on U.S. troops in the Middle East since the outbreak of the Gaza War on Oct. 7, underscoring the escalating tensions and security challenges in the region.

Gold price extends retreat from 10-day highs of $2,049 on the Fed day. Risk aversion props up the US Dollar even as Treasury bond yields tumble.   Fed Chair Powell's words hold the key for Gold price mixed technical indicators.   Gold price is extending its pullback from a ten-day high of $2,049 reached in the early American trading on Tuesday, as the US Dollar (USD) is attracting fresh demand amid broad risk-aversion on the all-important US Federal Reserve (Fed) interest rate decision day. All eyes remain on Fed Chair Jerome Powell's presser Markets are sensing caution, as China's economic concerns and escalating Middle East geopolitical tensions persist amid typical risk-averse trading heading into the Fed policy announcements. The tepid risk sentiment has revived the demand for the US Dollar as a safe-haven asset, fuelling a further retreat in Gold price. The official manufacturing data from China showed contraction for the straight month in January, as the market angst continues over the lack of large stimulus moves by authorities to shore up the economy. The downside in the Gold price, however, appears cushioned, thanks to the ongoing sell-off in the US Treasury bond yields, as investors remain wary ahead of Wednesday's Treasury Department's announcement of its bond-buying plan. Industry experts are expecting the US Treasury Department to increase the portion of longer-rated bonds as it did in recent debt-sale plans. Also, repositioning in the bond market before the Fed interest rate decision and Chair Jerome Powell's press conference could be attributed to the persistent weakness in the US Treasury bond yields. The Fed is expected to leave the interest rates unchanged following the conclusion of its two-day policy meeting on Wednesday. The focus, however, will be on Powell's post-meeting press conference for any hints on the timing and pace of the interest rate cuts. Data on Tuesday showed US JOLTS Job Openings unexpectedly increased in December, suggesting that the labor market still remains resilient, dissuading the Fed from delivering aggressive rate cuts. Gold price technical analysis: Daily chart As observed on the daily chart, Gold price seems at a critical juncture, looking to confirm an upside break from a month-long symmetrical triangle formation. The triangle breakout could be validated should the Gold price yield a daily closing above the falling trendline resistance at $2,036. The 14-day Relative Strength Index (RSI) indicator recaptured the midline, justifying the latest upswing in the bright metal. However, traders remain cautious as a Bear Cross was confirmed on Tuesday after the 21-day Simple Moving Average (SMA) crossed the 50-day SMA from above on a sustained basis. Amid mixed technical indicators, it now remains to be seen if the Gold price could sustain its recent upbeat momentum. The immediate strong resistance is seen around the $2,040 level, above which the psychological $2,050 level will be back in play. Further up, Gold optimists will target the December 12 high of 2,062. On the downside, an immediate cushion is seen around the $2,030 region, where the 21- and 50-day SMAs hang around. If the latter gives way, Gold sellers will test the rising trendline support of $2,017 on their way to the key $2,000 threshold. A balanced or hawkish tone perceived in Powell's speech could revive the hawks and trigger a fresh downfall in the non-interest-bearing Gold price.

The narrative of the last mile of disinflation being the hardest, which in 2023 became popular in the world of central banking, reflects concern that after having dropped significantly, further declines in inflation would be more difficult.However, it seems that relevance of this narrative is increasingly being questioned. The account of the December 2023 meeting of the ECB governing council mentions that it has been debated. It seemed that the disinflation of 2023 had been faster than in previous episodes, raising doubts about the relevance of the narrative. A paper of the Federal Reserve Bank of Atlanta analyses this topic for the US. Based on recent research on the Phillips curve, it concludes that the 'last mile' is likely not significantly more arduous than the rest. Before the terminal rate was reached, referring to the 'last mile' was a form of implicit policy guidance: it might be necessary to have more elevated rates or to keep rates high for longer. At the current juncture, the policy debate is all about when to start cutting rates and the 'last mile' narrative is quickly losing its relevance. In 2023, the narrative of the last mile of disinflation being the hardest became popular amongst central bankers and their watchers. It reflected concern that after having dropped significantly, further declines in inflation would be more difficult. When discussing this with a colleague who is also an experienced long-distance runner, he replied that the last mile was not the most arduous because getting close to the finish provides extra energy. Rather, the ten miles before the last one are the toughest. After all, the metaphor was perhaps not well chosen. Interestingly, it has also come under attack from economists and central bankers. The account of the December 2023 meeting of the ECB governing council mentions that members debated the notion of the 'last mile'.It was noted that in terms of economic activity, the cost of the disinflation had been relatively mild and that a soft landing remained possible, whilst acknowledging that with services inflation still at 4%, the 'last mile' might be challenging. However, it was also argued that "it was not clear why the nature of the disinflationary process would change as the target drew closer." Moreover, it seemed that the disinflation of 2023 had been faster than in previous episodes, raising doubts about the relevance of the 'last mile' narrative. A recent paper of the Federal Reserve Bank of Atlanta analyses this topic for the US and concludes that the 'last mile' "is likely not significantly more arduous than the rest." The author quotes recent research showing that the Phillips curve is nonlinear with a steep, negative slope for relatively high inflation rates before coming rather flat when inflation falls below 2%. This would imply that inflation can move back to target without a large negative impact on the labour market and that the 'last mile' of disinflation before reaching the target is not more arduous.Another potential argument in favour of the 'last mile' narrative would be elevated inflation expectations, through their impact on wage demands and price setting by companies. However, one-year-ahead inflation expectations of US companies have declined from 3.8% in March 2022 to 2.4% in December 2023, so it seems unlikely that they would make the 'last mile' more difficult. The Federal Reserve paper also mentions sticky services prices as a potential reason for slow disinflation arguing that price stickiness does not mean that disinflation becomes more difficult, it simply takes more time and requires more patience from policymakers. This interpretation is debatable: to the extent that services inflation persistence requires official rates to remain high for longer, the detrimental impact on activity, demand and the labour market could be significant. Unsurprisingly, these issues are also debated in the Eurozone. The ECB meeting account mentions that "it was argued that the main condition that would make inflation more persistent in the proximity of the inflation target was if inflation expectations became unanchored, which ultimately depended on the credibility of monetary policy." Interestingly, safeguarding credibility was also used as an argument to stop referring to the 'last mile' because it "might undermine confidence in the ECB's inflation target being achieved in a timely manner." This brings us to the key question of why using the narrative. Before the terminal rate was reached, one can argue that it helped in giving guidance by insisting that the 'last mile' might require more elevated rates or keeping rates high for longer. At the current juncture, the policy debate is all about when to start cutting rates. In this debate, the 'last mile' narrative is quickly losing its relevance. Download the Full Report!