Source: Poundsterlinglive

Gold price edges lower on Tuesday along with yields and equities.

The Trump administration seeks to toughen its semiconductor restrictions on China. 

Gold heads back to $2,930 and looks heavy with an overall market rout. 

Gold’s price (XAU/USD)  hit a new all-time high on Monday at $2,956, though traders were unable to enjoy it for long. The precious metal trades at around $2,940 at the time of writing on Tuesday, while US President Donald Trump’s administration plans to impose more limitations on China’s technological developments. A tougher stance on semiconductor restrictions and pressuring other allies to corner China is part of that strategy.  

The news creates a negative tone in markets this Tuesday. Traders are fleeing into bonds as a safe haven, which is pressuring yields for more downside (inverse correlation bond price to yield). Equities are also being slaughtered, with red numbers across the board from Asia to Europe, including  US equity futures. Except for three Federal Reserve (Fed) members who are set to speak, not much is expected on Tuesday ahead of the Personal Consumption Expenditures (PCE) due on Friday. 

Daily digest market movers: On the table

The Trump administration plans to expand its limitations on China's technological developments, including tougher semiconductor curbs and pressuring allies to install restrictions on China's chip industry. Trump’s goal is to prevent China from developing a domestic semiconductor industry that could boost its AI and military capabilities, Bloomberg reports.

The CME FedWatch tool shows an uptick in chances for an interest rate cut by the Federal Reserve (Fed) in June by 25 basis points (bps), growing to 50.0%, while odds for a rate pause have diminished to only 32.6%, backed by the drop in US yields this Tuesday.

Investors are looking ahead to January’s Personal Consumption Expenditures Price Index, the Fed preferred inflation gauge, set to release on Friday, for clues on monetary policy, with the indicator expected to cool to its slowest since June, Reuters reports. 

Fed Vice Chair for Supervision Michael Barr will give a speech on financial stability and answer questions at an event hosted by Yale School of Management at 16:45 GMT.

Richmond Fed President Tom Barkin will give a speech called "Inflation Then and Now",  followed by a Q&A at an event hosted by the Rotary Club of Richmond, expected around 18:00 GMT. 

At 21:15 GMT, President of the Federal Reserve Bank of Dallas Lorie Logan will speak on the future of the central bank balance sheet at the Bank of England's annual BEAR research conference in London, United Kingdom.

Technical Analysis: Technical below pivot

A quick drop below the daily Pivot Point near $2,943 is signalling a bit of an issue for Gold on Tuesday. Selling pressure is present, and it looks like buyers already tried to get Gold back above the daily Pivot in early Asian trading but failed. The S1 support at $2,930 has held for now, though once that level breaks, the S2 support only comes in at $2,908. 

On the upside, the all-time high at $2,956 remains the main level to watch. On the way up, the daily R1 resistance at $2,964 comes in after that. Further up, the R2 resistance stands at $2,977 before considering the $3,000 mark.

On the downside, the S1 support comes in at $2,930, which roughly coincides with Monday’s low in the US session. In case that level does not hold, the $2,900 big figure comes into play with the S2 support at $2,908.

XAU/USD: Daily Chart

Source: FXSTREET

Above: The election result breakdown. Image courtesy of Google.

Source: Poundsterlinglive

Australia releases January inflation data tonight, and expectations are for a rebound in headline CPI from 2.5% to 2.6%. Markets will look closely at the trimmed mean to gauge whether the sharp decline to 2.7% in December was the start of a broader trend, ING’s FX analysts Francesco Pesole notes.

AUD/USD to return below 0.620 in the coming months

"We see risks of a relatively hot print tonight which can further endorse the RBA’s cautious stance on future rate cuts after kickstarting its easing cycle last week. Alongside inflation, the jobs market provided strong signals in the January report released after last week's rate cut. Employment increased by 44,000, doubling expectations and notably driven entirely by full-time hiring."

"Risks to growth related to the impact of US protectionism can still lead to three more cuts by the RBA this year, but we think tonight’s CPI print can prompt a hawkish repricing in the AUD curve, which currently embeds 50bp by year-end. We expect some support coming the Aussie dollar’s way, but like for EUR/USD, we remain bearish on AUD/USD on the back of tariff risk, and target a return below 0.620 in the coming months."

Source: FXSTREET

WTI price rose as the US imposed sanctions on brokers, tanker operators, and shipping companies involved in Iranian petroleum.

Oil price gains were capped as Trump announced to proceed with import tariffs on Canada and Mexico.

French President Emmanuel Macron suggested a truce between Ukraine and Russia could be reached in the coming weeks.

West Texas Intermediate (WTI) Oil price continues its upward momentum for the second consecutive day, trading around $70.90 per barrel during European hours on Tuesday. Crude Oil prices are rising as fresh United States (US) sanctions on Iran’s Oil trade heighten concerns about tighter global supply.

On Monday, the US imposed sanctions on more than 30 brokers, tanker operators, and shipping companies involved in the sale and transportation of Iranian petroleum. This represents the second wave of sanctions as US President Donald Trump seeks to drive Iran's crude exports to zero in an effort to prevent the country from developing nuclear weapons, per Reuters.

However, Oil price gains were limited by an uncertain demand outlook after President Trump stated late Monday that sweeping US tariffs on imports from Canada and Mexico “will go forward” when the current one-month delay expires next week. Trump reiterated his belief that the US has been “taken advantage of” by foreign nations and affirmed his plan to enforce so-called reciprocal tariffs.

Market participants also assessed the possibility of a peace deal in the Ukraine conflict, which could ease sanctions on Russia and potentially increase its Oil exports. French President Emmanuel Macron told Fox News late Monday that a truce between Ukraine and Russia could be reached in the coming weeks following discussions with Donald Trump at the White House on the third anniversary of Russia's invasion.

Meanwhile, the potential resumption of Oil shipments from Iraq’s Kurdistan region could help mitigate the impact of reduced Iranian exports. Iraq is awaiting Turkey's approval to restart Oil flows from the Kurdistan region, with the Iraqi Oil minister expressing hope on Monday that Kurdish Oil exports could resume within two days.

Source: FXSTREET

The European Union is about to walk back significant chunks of planned ESG regulations, amid a barrage of complaints that such rules are becoming a dead weight hampering EU efforts to compete with the US and Asia.

The European Commission, the EU’s executive arm, has proposed that regulations covering everything from ESG reporting requirements to supply-chain management be watered down to protect business interests in the bloc, according to documents seen by Bloomberg. The final proposal is set to be made public on Wednesday.

The move follows intense pressure both from within and outside Europe to rein in environmental, social and governance legislation. The development has major implications for the future of ESG globally, with Europe accounting for well over 80% of the world’s ESG fund assets.

Germany and France, the EU’s two largest economies, have been lobbying hard for smaller and mid-sized companies to be excluded from the full scope of reporting requirements, as both countries react to faltering economic productivity. In France, a government spokesperson went so far as to characterize ESG corporate reporting rules as “hell” for the companies expected to comply.

Europe’s decision to scale back its ESG agenda comes as American companies enter a new age of deregulation under President Donald Trump. The 78-year-old has taken a sledgehammer to the green agenda of his predecessor, Joe Biden, and has made tariffs a cornerstone of US trade policy.

The EU has also faced more direct pressure from the US to rein in the scope of its ESG regulations. Newly confirmed US commerce secretary Howard Lutnick told Republican senators last month that he was willing to consider deploying “trade tools” to ensure American companies exposed to the EU market aren’t expected to comply with CSDDD.

The European Commission is now recommending that the Corporate Sustainability Due Diligence Directive, which was designed to expose companies to legal liability if their value chains were found to contain ESG breaches, be reined in considerably. That includes lower potential fines and a reduced obligation to monitor the ESG risks of business partners, suppliers and customers.

The Carbon Border Adjustment Mechanism, which will put a levy on EU imports of goods like steel and cement from countries with less strict climate policies, will be softened so that domestic companies face a reduced reporting requirement.

The commission is also proposing that only firms with over 1,000 employees and annual revenue exceeding €450 million (RM2.08 billion) be subject to the full scope of both the Corporate Sustainability Reporting Directive and CSDDD. Doing so would exclude an estimated 85% of the companies originally targeted in CSRD and would be in line with German and French demands.

Meanwhile, a provision for so-called double materiality — a concept that requires companies to take into account not just the financial ESG risks they may face but also their environmental and social impact — looks to be intact, according to draft material seen by Bloomberg. Given the proposed cuts to CSDDD and CSRD, however, the provision would likely apply to fewer companies than originally intended.

A spokesperson for the commission declined to comment, citing a policy of not responding to leaks.

Lawmakers from the EU’s green bloc, meanwhile, were quick to denounce the plans.

“It is an illusion to think that dismantling sustainability laws will solve the structural problems of the economy,” said Anna Cavazzini, a green lawmaker who’s chair of the internal market committee, in an emailed comment.

She says Europe’s competitiveness problems are instead “due to the current China shock, to a lack of innovation, to high energy prices brought by the war of aggression against Ukraine, and to insufficient investment. They are certainly not due to the EU due diligence law, which is not even in force yet.”

The commission is due to unveil its proposal for the so-called omnibus legislation on Feb. 26, when the bloc will look at CSDDD, CSRD and the Taxonomy Regulation.

Maria Luis Albuquerque, the EU’s financial services commissioner, said in an interview last month that there’s room for adjustments to ESG rules, while noting that outright deregulation isn’t the goal.

It’s about “adjusting the pace” while “maintaining the anchor”, she said then.

But civil society groups are now questioning that characterisation.

The planned rollback of ESG regulations looks “reckless,” said Maria van der Heide, head of EU policy at nonprofit ShareAction. “Sustainability laws designed to tackle the most pressing crises — climate breakdown, human rights abuses, corporate exploitation — are being crossed out behind closed doors and at record speed. This is not simplification; it’s pure deregulation.”

Source: Theedgemarkets