China's Demand for Gold Is Unstoppable As Consumers, Investors, And the Central Bank Fuel a Record-Breaking Price Surge

Commodity

Economic

Summary:

Gold's rise to all-time highs above $2,400 an ounce this year has captivated global markets. China, the world's biggest producer and consumer of the precious metal, is front and center of the extraordinary ascent.

Worsening geopolitical tensions, including war in the Middle East and Ukraine, and the prospect of lower US interest rates all burnish gold's billing as an investment. But juicing the rally is unrelenting Chinese demand, as retail shoppers, fund investors, futures traders and even the central bank look to bullion as a store of value in uncertain times.

China and India have typically vied over the title of world's biggest buyer. But that shifted last year as Chinese consumption of jewelry, bars and coins swelled to record levels. China's gold jewelry demand rose 10% while India's fell 6%. Chinese bar and coin investments, meanwhile, surged 28%.

And there's still room for demand to grow, said Philip Klapwijk, managing director of Hong Kong-based consultant Precious Metals Insights Ltd. Amid limited investment options in China, the protracted crisis in its property sector, volatile stock markets and a weakening yuan are all driving money to assets that are perceived to be safer.

“The weight of money available under these circumstances for an asset like gold – and actually for new buyers to come in – is pretty considerable,” he said. “There isn't much alternative in China. With exchange controls and capital controls, you can't just look at other markets to put your money into.”

Although China mines more gold than any other country, it still needs to import a lot and the quantities are getting larger. In the last two years, overseas purchases totaled over 2,800 tons — more than all of the metal that backs exchange-traded funds around the world, or about a third of the stockpiles held by the US Federal Reserve.

Even so, the pace of shipments has accelerated lately. Imports surged in the run-up to China's Lunar New Year, a peak season for gifts, and over the first two months of the year are 53% higher than they were in 2023.

The People's Bank of China has been on a buying spree for 17 straight months, its longest-ever run of purchases, as it looks to diversify its reserves away from the dollar and hedge against currency depreciation.

It's the keenest buyer among a number central banks that are favoring gold. The official sector snapped up near-record levels of the precious metal last year and is expected to keep purchases elevated in 2024.

It's indicative of gold's allure that Chinese demand remains so buoyant, despite record prices and a weaker yuan that robs buyers of purchasing power.

As a major importer, gold buyers in China often have to pay a premium over international prices. That jumped to $89 an ounce at the start of the month. The average over the past year is $35 versus a historical average of just $7.

For sure, sky-high prices are likely to temper some enthusiasm for bullion, but the market's proving to be unusually resilient. Chinese consumers have typically snapped up gold when prices drop, which has helped establish a floor for the market during times of weakness. Not so this time, as China's appetite is helping to prop up prices at much higher levels.

That suggests the rally is sustainable and gold buyers everywhere should be comforted by China's booming demand, said Nikos Kavalis, managing director at consultancy Metals Focus Ltd.

China's authorities, which can be quite hostile to market speculation, are less sanguine. State media have warned investors to be cautious in chasing the rally, while both the Shanghai Gold Exchange and Shanghai Futures Exchange have raised margin requirements on some contracts to snuff out excessive risk-taking. SHFE's move followed a surge in daily trading volumes to a five-year high.

A less frenetic way to invest in gold is via exchange-traded funds. Money has flowed into gold ETFs in mainland China during almost every month since June, according to Bloomberg Intelligence. That compares with chunky outflows in gold funds in the rest of the world.

The influx of money has totaled $1.3 billion so far this year, compared with $4 billion in outflows from funds overseas. Restrictions on investing in China are again a factor here, given the fewer options for Chinese beyond domestic property and stocks.

Chinese demand could continue to rise as investors look to diversify their holdings with commodities, BI analyst Rebecca Sin said in a note.

Source: Fortune

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Samantha Luan

Economic

Higher inflationary expectations and price tolerance are taking root in Japan, a development that supports the central bank’s moves to normalize policy and raise interest rates further.

A recent survey by Tsutomu Watanabe, a leading inflation expert in the nation, found that Japanese consumers’ tolerance of price changes is holding up and is higher than levels seen among shoppers in some other major economies. The survey showed for the third-year running that more than half of respondents would continue to buy a product at the same supermarket even if prices rose by 10%.

The result is another indication that Japanese consumers are accepting inflation for the first time in decades and are shedding their reputation for being among the most price-sensitive consumers in the world. The survey, which has been cited by the Bank of Japan in the past, suggests Japanese are more resigned to price hikes than their peers in the UK, Germany and Canada. Inflation Mindset Taking Root In Japan Boosts Case For BOJ Hikes_1

Inflation Mindset Taking Root In Japan Boosts Case For BOJ Hikes_1

A government report last week showed a key price gauge rose by 2.6% in March, keeping price growth at or above the BOJ’s 2% price target for a full two years. It’s forecast to accelerate this summer.

“This is a big shift for Japan’s economy,” said Tomo Kinoshita, global market strategist at Invesco Asset Management, commenting on the report. “Unless there is a huge policy mistake, Japan probably won’t go back to a deflationary mindset.”

For now the risk for Japan’s price expectations is to the upside, with the prospect of elevated oil prices due to the escalating conflict in the Middle East, and with the yen trading around a 34-year low. Energy prices and the currency have historically been primary drivers of price swings in the nation, which relies heavily on imports for food and energy.

An upward shift in inflation perceptions makes price growth stickier as the BOJ counts it as a key element to support price growth. The bank concludes a two-day policy gathering Friday after ending its massive monetary easing program last month. BOJ watchers expect authorities to stand pat Friday, with a focus on any shift in the assessment of upside risks for hints to the timing for an additional interest rate hike.

Japanese households expect annual price growth of 5% over the next five years, marking the highest rate for eight straight quarters, the longest streak in data going back to 2006, according to a quarterly BOJ survey released on April 12.

The central bank’s Tankan data this month revealed that Japanese businesses see the annual inflation rate at 2.1% five years ahead, staying at the highest level for five quarters in data going back to 2014. Inflation Mindset Taking Root In Japan Boosts Case For BOJ Hikes_2

Inflation Mindset Taking Root In Japan Boosts Case For BOJ Hikes_2

“Following decades of little to no inflation, there are signs that the recent inflation episode has led more firms to raise prices,” Louis Kuijs, S&P Global Ratings’ Asia-Pacific chief economist, wrote in a report on April 17. “The spike was kickstarted by higher commodity and energy prices and currency depreciation. Importantly, firms’ inflation expectations have risen.”

The International Monetary Fund echoes that view, projecting Japan’s price growth will stay above 2% through 2025. Nada Choueiri, its mission chief to Japan, expects the BOJ to achieve its sustainable inflation target.

“The usual consumer mindset for somebody who lives with inflation is starting to appear in the Japanese economy,” Choueiri told Bloomberg last week.

Wage growth will be a key to anchoring expectations at around the BOJ’s 2% goal. Rengo, Japan’s biggest umbrella group for labor unions, has reported that this year’s wage negotiations resulted in the biggest pay increase in three decades, boosting expectations for real wages to turn positive sometime this year.

“Inflation expectations have changed,” said Junki Iwahashi, economist at Sumitomo Mitsui Trust Bank. “Still it’s uncertain if they will be anchored at 2% as the BOJ aims for. Wage increases are very important.”

Source：Bloomberg

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Damon

Economic

A series of higher-than-expected inflation data since the beginning of the year has completely reversed the market's policy expectations for the second half of this year. The number of interest rate cuts for this year has reduced to one or two by mid-April from six or more projected in January. Does this mean that we have returned to square one in terms of inflation and interest rates? The answer is no for inflation. However, for interest rates, it has indeed returned to a phase where the Fed needs to wait until it has sufficient confidence that inflation will persistently come down to its target level.

Federal Reserve Chairman Powell has also made hawkish remarks, suggesting a delay in interest rate cuts. Rate cuts can be delayed for some time, but not as long as suggested by officials. June and July are still an appropriate time for initiating a rate-cut cycle. If the Fed fails to achieve its target of keeping inflation under control before July, considering the subsequent elections, it will be even more challenging to achieve "victory" over inflation in the second half of this year.

Have we returned to square one in terms of inflation?

The CPI data from January to March this year was stronger than expected. Some people believe that these data largely negate the substantial progress on inflation made last year.

How Long Will Fed Rate Cuts Be Delayed?_1

The deadline inflation has decreased, and not prices of all goods and services are rising. In the initial phase of disinflation, the decline was mainly driven by lower energy and commodity prices, so caution was exercised regarding the early decline in inflation. However, the situation has changed now. The decline in inflation is no longer limited to energy and commodity prices, especially in core PCE inflation (the Fed's primary inflation target), which has dropped from 4.8% in March 2023 to an estimated 2.8% in March 2024. Although measures of inflation breadth or stickiness have not fully returned to normal levels, significant progress has been made compared to six months ago.

How Long Will Fed Rate Cuts Be Delayed?_2

Although inflation is not universal, some specific industries still face serious inflation problems. Housing costs, auto insurance premiums, and repair services have been the main drivers in the recent higher-than-expected inflation. The inflation in these industries is mainly due to supply chain problems and delayed reactions to external shocks such as immigration, which is less sensitive to interest rates in the short term. Given that inflation expectations have stabilized, some time should be given for the market to digest these reactions. Additionally, while there are concerns that wage increases could lead to inflation, the wage growth in many service industries has significantly slowed down, and the risk of a wage-price spiral is actually small. How Long Will Fed Rate Cuts Be Delayed?_3

How Long Will Fed Rate Cuts Be Delayed?_3

Lastly, the overall economic resilience, particularly in the labor market, leads people to believe that the cost of delaying interest rate cuts is extremely low. However, does this argument still hold when considering the lag in policy transmission? If maintaining the current rates does not have a negative impact, how much negative impact would a 25 basis points rate cut bring?

The labor market is actually much weaker than it appears. Although wage data indicates an increase in employment opportunities, many of the newly added jobs are low-quality part-time positions, indicating a weakening labor demand. The decline in average weekly working hours is also an unfavorable signal because this decline usually occurs only during economic recessions. The steady rise in labor force participation may not be the result of workers' choice but rather a response to the market situation. How Long Will Fed Rate Cuts Be Delayed?_4

How Long Will Fed Rate Cuts Be Delayed?_4

Timing of interest rate cuts

We believe that June and July are still the appropriate time to start cutting rates despite the downward pressure on rate cut expectations. Among the two, July appears to be a more likely time for rate cuts, although June also has some advantages. Before the June FOMC meeting, there will be more economic data (inflation and employment reports) available for reference, and there will be one additional set of economic data available before the July meeting. There could be risks if decision-makers overly rely on the last set of data to decide whether to cut rates since the data may bring uncertainty. In other words, if the last set of data before July is worse than the previous data, It will also be more difficult to explain the rate-cut decision.

Overall, we still expect a rate cut in the summer, with the possibility of three to four cuts throughout the year. While this viewpoint may not be widely supported or agreed upon at the moment, there may be many changes in the data in the two months leading up to the June meeting, and these changes may influence the Fed's decision.

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Ukadike Micheal

Economic

Commodity

Copper prices surged to a two-year high before experiencing a slight pullback, prompting investors to assess the future trajectory of metals amidst a robust performance in April. The broad gains in base metals, particularly copper, have been driven by positive signals in manufacturing activities in key economies such as the US and China, despite lingering geopolitical risks and uncertainties surrounding monetary policies.

Analysts from a prominent financial institution emphasized that the direction of metal prices will be contingent on data and individual metal fundamentals. They expressed confidence in the copper market over the next three months, citing expectations of a tighter market and potential short covering. However, the outlook for other metals appears less favorable due to weaker physical fundamentals.

Investors are also monitoring potential shifts in the Federal Reserve's approach to interest rates, with recent indications suggesting a slower pace of rate cuts than previously anticipated. While copper prices initially climbed early in the week before stabilizing, zinc and aluminum experienced marginal declines. Iron ore futures remained steady after registering consecutive weekly gains.

From a technical standpoint, the fluctuations in metal prices can have ripple effects across various sectors of the market. Base metals like copper often serve as economic indicators, with rising prices signaling increased industrial activity and potential inflationary pressures. As investors navigate the complexities of the metal markets, understanding these dynamics can inform trading strategies and portfolio decisions across different asset classes.

The performance of base metals like copper can impact not only the commodities market but also other sectors such as construction, manufacturing, and technology. For instance, copper is widely used in electrical wiring and plumbing, making it a crucial component in the construction industry. Therefore, fluctuations in copper prices can have a direct impact on construction costs and project feasibility.

In the manufacturing sector, copper is a key material for various industrial processes, including the production of electronics, machinery, and transportation equipment. As such, changes in copper prices can influence production costs and ultimately affect the competitiveness of manufacturers in the global market.

Moreover, the technology sector relies heavily on copper for the production of electronic devices, communication equipment, and renewable energy technologies. With the increasing demand for electric vehicles and renewable energy sources, the availability and cost of copper play a significant role in the development and adoption of these technologies.

In the context of global trade tensions and geopolitical uncertainties, the performance of base metals like copper can also reflect broader market sentiment and investor confidence. As a barometer of economic health, copper prices can signal shifts in consumer demand, investor risk appetite, and overall market stability.

The recent movements in metal prices underscore the intricate interplay between economic data, geopolitical developments, and monetary policy shifts. While the bullish outlook for copper reflects optimism in the market, uncertainties stemming from global trade tensions and central bank actions continue to pose challenges. By staying abreast of market trends, understanding the implications of metal price fluctuations, and maintaining a diversified investment approach, investors can navigate the evolving landscape of metal markets, capitalize on opportunities, and manage risks effectively.

Source: Bloomberg

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Warren Takunda

Cryptocurrency

Economic

Bitcoin recovered sharply from the intra-week lows and is likely to close the halving week with a minor loss of roughly 1%. According to Farside Investors data, the spot Bitcoin exchange-traded funds witnessed an inflow of $30.4 million a day before the halving, halting the five successive days of outflows.

The Grayscale Bitcoin Trust (GBTC) has seen the majority of outflows, while BlackRock’s iShares Bitcoin Trust (IBIT) has continually attracted investments. Bloomberg Intelligence ETF analyst Eric Balchunas said in a X post that the IBIT has seen “69 days of straight inflows.” Bitcoin Turns Bullish After the Halving - Will BNB, NEAR, MNT, and RNDR Follow?_1

Bitcoin Turns Bullish After the Halving - Will BNB, NEAR, MNT, and RNDR Follow?_1

Crypto market data daily view. Source: Coin360

The Bitcoin ETFs inflows are likely to grow from strength to strength in 2024. Bitwise CEO Hunter Horsley believes that several wealth management firms will own Bitcoin ETFs by the end of 2024. He highlighted that the firms were “long only” and will be “an amazing new constituent in the Bitcoin space.”

Will Bitcoin and altcoins overcome their respective overhead resistance levels? Let’s study the top 5 cryptocurrencies that look strong on the charts and may do so.

Bitcoin price analysis

Bitcoin’s recovery has reached the 20-day exponential moving average ($65,850), an important level to keep an eye on. Bitcoin Turns Bullish After the Halving - Will BNB, NEAR, MNT, and RNDR Follow?_2

Bitcoin Turns Bullish After the Halving - Will BNB, NEAR, MNT, and RNDR Follow?_2

BTC/USDT daily chart.

If the price turns down sharply from the moving averages, it will signal that bears are selling on rallies. That could result in a retest of the $60,775 to $59,600 support zone. Buyers are expected to defend this zone with all their might because a breakdown could accelerate selling. The BTC/USDT pair may then plummet to the 61.8% Fibonacci retracement level of $54,298.

Contrarily, if the price breaks above the moving averages, it will suggest that the pair may swing between $60,775 and $73,777 for some more time. The bulls will have to drive the price above the overhead resistance to open the doors for a rally to $84,000. Bitcoin Turns Bullish After the Halving - Will BNB, NEAR, MNT, and RNDR Follow?_3

Bitcoin Turns Bullish After the Halving - Will BNB, NEAR, MNT, and RNDR Follow?_3

BTC/USDT 4-hour chart.

The moving averages have completed a bullish crossover on the 4-hour chart, suggesting that the bulls have the edge in the near term. The pair could face resistance between $67,000 and $68,000, but if this zone is cleared, the next stop may be $71,000.

This optimistic view will be negated if the price turns down and breaks below the moving averages. That could signal aggressive selling on rallies. The pair may slide to $63,000 and subsequently to $60,775.

Binance Coin price analysis

Binance Coin has been range-bound between $495 and $635 for the past few days, indicating a balance between supply and demand. Bitcoin Turns Bullish After the Halving - Will BNB, NEAR, MNT, and RNDR Follow?_4

Bitcoin Turns Bullish After the Halving - Will BNB, NEAR, MNT, and RNDR Follow?_4

BNB/USDT daily chart.

Buyers pushed the price above the moving averages on April 20, indicating that the selling pressure is reducing. The BNB/USDT pair could move toward the overhead resistance of $635, where the bears are likely to sell aggressively. If the price turns down sharply from $635, the range-bound action may continue for a while longer.

The next trending move is likely to begin on a break above $635 or below $495. If the $635 level is taken out, the pair may start its journey toward $692. On the downside, a slide below $495 could sink the pair to $460. Bitcoin Turns Bullish After the Halving - Will BNB, NEAR, MNT, and RNDR Follow?_5

Bitcoin Turns Bullish After the Halving - Will BNB, NEAR, MNT, and RNDR Follow?_5

BNB/USDT 4-hour chart.

The 20-EMA has started to turn up on the 4-hour chart, and the RSI is in the positive territory, indicating that bulls are attempting a comeback. There is a minor resistance at $585, but if this level is crossed, the pair may reach $600 and then $635. The bears are likely to mount a strong defense near $635.

The positive view will be invalidated in the near term if the price turns down and breaks below the moving averages. The pair may then slump to $540 and later to $510.

Near Protocol price analysis

Near Protocol has been falling inside a descending channel pattern, indicating that the trend favors the bears.

Bitcoin Turns Bullish After the Halving - Will BNB, NEAR, MNT, and RNDR Follow?_6

NEAR/USDT daily chart.

However, the rise above the 20-day EMA ($6.15) suggests that the selling pressure may be reducing in the short term. The NEAR/USDT pair will attempt a rally to the resistance line, where the bears are likely to sell aggressively. If the price turns down sharply from the resistance line, it will signal that the pair may remain inside the channel.

If buyers want to gain the upper hand, they will have to drive the pair above the channel. That will signal a short-term trend change, and the pair may rally to $8 and then to $9. Bitcoin Turns Bullish After the Halving - Will BNB, NEAR, MNT, and RNDR Follow?_7

Bitcoin Turns Bullish After the Halving - Will BNB, NEAR, MNT, and RNDR Follow?_7

NEAR/USDT 4-hour chart.

After a long struggle, the pair broke above the $5.90 level, indicating that bulls have a slight edge. The price may turn down and retest $5.90, but if bulls flip this level into support, the pair may reach the resistance line.

Alternatively, if the price turns down sharply and breaks below the moving averages, it will suggest that the breakout above $5.90 may have been a bull trap. That could drag the price down to $5 and later to the support line of the channel.

Mantle price analysis

Mantle (MNT) broke out of the 20-day EMA ($1.18) on April 20 after staying between the moving averages for several days. This suggests that bulls are trying to take charge. Bitcoin Turns Bullish After the Halving - Will BNB, NEAR, MNT, and RNDR Follow?_8

Bitcoin Turns Bullish After the Halving - Will BNB, NEAR, MNT, and RNDR Follow?_8

MNT/USDT daily chart.

However, the long wick on the April 21 candlestick shows that the bears have not yet given up and are attempting to pull the price back below the 20-day EMA. If they do that, it may trap the aggressive bulls and yank the price down to the 50-day SMA ($1.09). A break below this level could sink the MNT/USDT pair to $1.

On the contrary, if the price maintains above the 20-day EMA, it will suggest that the bulls are defending the level. The pair may then rise to the 61.8% Fibonacci retracement level of $1.32, and if this level is scaled, the next stop could be $1.51. Bitcoin Turns Bullish After the Halving - Will BNB, NEAR, MNT, and RNDR Follow?_9

Bitcoin Turns Bullish After the Halving - Will BNB, NEAR, MNT, and RNDR Follow?_9

MNT/USDT 4-hour chart.

The bulls have pushed the price above the symmetrical triangle pattern, indicating that the correction may have ended. If the price rebounds off the 20-EMA, it will increase the possibility of a rally above $1.25. The pair may then rise to $1.32.

Meanwhile, the bears are likely to have other plans. They will try to tug the price back into the triangle. That may trap the bulls, and a break below the triangle will tilt the advantage in favor of the bears. The pair may then tumble to $1.

Render price analysis

Render (RNDR) has been in a corrective phase for several days, but the bulls are trying to make a comeback by pushing the price above the downtrend line. Bitcoin Turns Bullish After the Halving - Will BNB, NEAR, MNT, and RNDR Follow?_10

Bitcoin Turns Bullish After the Halving - Will BNB, NEAR, MNT, and RNDR Follow?_10

RNDR/USDT daily chart.

The 20-day EMA ($8.90) has flattened out, and the RSI has risen to the midpoint, suggesting that the bears are losing their grip. If the price maintains above the 20-day EMA, the RNDR/USDT pair is likely to rise to the 50-day SMA ($9.95) and then to $12.

Instead, if the price turns down and sustains below the 20-day EMA, it will suggest that the breakout may have been a fake move. The bears will then try to pull the price to $7 and later to $6. Bitcoin Turns Bullish After the Halving - Will BNB, NEAR, MNT, and RNDR Follow?_11

Bitcoin Turns Bullish After the Halving - Will BNB, NEAR, MNT, and RNDR Follow?_11

RNDR/USDT 4-hour chart.

The moving averages have completed a bullish crossover, indicating advantage to buyers. However, the bears may pose a strong challenge at $9.50. If the price turns down from the overhead resistance but takes support at the 20-EMA, it will suggest a change in sentiment from selling on rallies to buying on dips. That will enhance the prospects of a rally to $10.50.

Contrary to this assumption, a break and close below the moving averages will suggest that the recent breakout was a bull trap. The pair may then descend to $7.

Source: Cointelegraph

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Ukadike Micheal

Economic

Commodity

Stocks

Shares rallied in Europe and Asia on Monday as investors shifted their focus to corporate earnings reports, marking a positive start to the week despite recent declines in Wall Street's big technology stocks. U.S. futures also pointed to higher openings, with contracts for the S&P 500 and Dow Jones Industrial Average showing gains of 0.3%.

A multitude of companies are slated to release their first-quarter performance reports this week, adding to market anticipation. European shares opened with mixed results, with Germany's DAX and the FTSE 100 in the UK posting gains, while France's CAC 40 edged lower. In Asia, the Hang Seng index in Hong Kong led the region's gains, while the Shanghai Composite index retreated after the People’s Bank of China maintained its loan prime rates, signaling cautious optimism about the economy's growth trajectory.

Market analysts remain cautiously optimistic about the economic recovery, noting both promising signs and lingering challenges. Despite a stronger-than-expected first-quarter GDP reading, concerns persist regarding weaknesses in domestic demand and challenges in the property sector. Analysts warn that any signs of faltering momentum in the recovery could prompt calls for further stimulus measures later in the year.

In Japan, the Nikkei 225 index advanced, supported by a weakening yen, while South Korea's Kospi and Australia's S&P/ASX 200 also registered gains. However, uncertainty looms in global markets, exacerbated by recent trends in the U.S. tech sector. Last week, the S&P 500 endured its third consecutive losing week, with tech stocks facing their worst performance since March 2020 amid discouraging trends reported by industry giants.

The market's reaction underscores growing concerns about the Federal Reserve's monetary policy stance. Expectations of prolonged higher interest rates have weighed on investor sentiment, particularly impacting high-growth sectors like technology. With interest rates unlikely to provide significant relief in the near term, companies face increased pressure to deliver growth in profits to satisfy investor expectations.

Meanwhile, in the oil market, prices retreated slightly after recent volatility fueled by geopolitical tensions in the Middle East. While U.S. benchmark crude oil and Brent crude both declined, market dynamics remain sensitive to developments in the region, highlighting ongoing concerns about supply disruptions and geopolitical risks.

While global markets exhibit resilience amid ongoing challenges, uncertainties persist, shaping investor sentiment and market dynamics. The focus on corporate earnings reports provides insights into the health of the economy and individual sectors, guiding investment decisions in an evolving market landscape. As investors navigate through market fluctuations and geopolitical uncertainties, prudent risk management and a focus on long-term fundamentals remain crucial for achieving investment objectives.

Source: Associated Press News

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Alex

Economic

Central Bank

Forex

The Pound Sterling (GBP) remains on the back foot in Monday’s London session as investors continue to price in the Bank of England (BoE) will pivot to interest-rate cuts earlier than the US Federal Reserve (Fed). The GBP/USD pair trades close to a five-month low around 1.2360 as investors expect that the Fed will keep its monetary policy framework restrictive for longer. A strong economic outlook and robust consumer spending in the United States are keeping inflation higher.

The US Dollar Index (DXY), which tracks the US Dollar’s value against six major currencies, trades broadly steady near the crucial support of 106.00. This week, the US Dollar will be guided by the core Personal Consumption Expenditure Price Index (PCE) data for March, which is expected to influence Fed rate cut expectations. Currently, financial markets are anticipating that the Fed will begin to reduce borrowing rates from September.

Meanwhile, easing fears of further escalation in tensions between Israel and Iran could offer some support to risk-sensitive assets. Iran said they have no plans for an immediate retaliation, according to Al Jazeera.

Daily digest market movers: Pound Sterling slips further while US Dollar sees upside

The Pound Sterling finds temporary support near 1.2360 after retreating from 1.2470. More downside is likely after comments from Bank of England Deputy Governor Dave Ramsden on Friday, who said that upside risks to inflation have receded and that price growth could undershoot the central bank’s recent projections.

Ramsden said "Over the last few months I have become more confident in the evidence that risks to persistence in domestic inflation pressures are receding, helped by improved inflation dynamics," Reuters reported. However, he warned that unlike the United States the backdrop to inflation in Britain was of continuing weak economic growth.

Strong prospects for UK inflation easing sooner and a downbeat economic outlook are expected to allow the BoE to start reducing interest rates earlier than previously anticipated.

The prospects for inflation easing further were also boosted by weak Retail Sales data for March. The Office for National Statistics (ONS) showed Friday that Retail Sales were unchanged in March compared with the previous month and below the 0.3% increase forecast by economists. In February, Retail Sales grew by a meagre 0.1%. The Retail Sales data is a leading indicator of consumer spending, so weak figures signal the deepening cost-of-living crisis due to higher interest rates by the central bank.

Going forward, the Pound Sterling will dance to the tunes of the S&P Global/CIPS preliminary PMI data for April, which will be published on Tuesday. The Manufacturing PMI is expected to expand steadily by 50.3. The Services PMI is estimated to have declined slightly to 53.0 from 53.1.

Technical Analysis: Pound Sterling dips below 1.2400

The Pound Sterling resumes its downside journey after failing to recapture the crucial resistance of 1.2400. The GBP/USD pair weakens after a breakdown of the Head and Shoulder chart pattern, whose neckline is plotted from the December 8 low around 1.2500. Declining 20-day and 50-day Exponential Moving Averages (EMAs) at 1.2525 and 1.2600, respectively, indicate that the long-term outlook is bearish.

The 14-period Relative Strength Index (RSI) oscillates in the range of 20.00-40.00, indicating a strong bearish momentum.