Weaker Dollar Underpins Currencies, Gold
A weaker U.S. Dollar helped underpin the Euro, British Pound and Gold on Monday. The Greenback fell under pressure following remarks by U.S. Federal Reserve Vice Chairman Stanley Fischer that hindered global economic growth could cause the U.S. Federal Reserve to delay its anticipated rate hike.
Over the week-end, Fischer said at the annual meeting of the International Monetary Fund that weakness in foreign markets could sway the Fed into altering the pace of the Fed’s rate hikes.
“If foreign growth is weaker than anticipated, the consequences for the U.S. economy could lead the Fed to remove accommodation more slowly than otherwise,” Fischer said.
The EUR/USD traded higher on the Fischer comments despite flat German WPI data. The report showed a little improvement from last month’s 0.2% decline, but exactly as forecast at 0.1%.
The firm price action by the GBP/USD was all related to Fischer’s comments since there were no scheduled economic releases. Later tonight, the U.K. will release data on BRC retail sales.
While the news of slowing growth helped weaken the U.S. Dollar, it did help drive December Comex Gold to nearly a four week high. At this time, support for gold is coming from the weakening dollar and the sell-off in the equity markets. Additional support is coming from the start of wedding season in India and the Diwali festival.
Technical chart patterns suggest gold has the potential to reach the $1253.80 to $1270.40 retracement area over the near-term.
December crude oil lost ground on Monday amid concerns about a slowdown in global economic growth. A weakening global economy should lead to a drop in demand, however, production in the U.S., Russia and Saudi Arabia is expected to show no signs of let up. This should lead to a further increase in supply and lower prices.