Dollar climbs on hawkish Fed remarks
The PPI data was decidedly unfriendly to the disinflationary narrative. It came out 0.7% month-on-month, up from -0.2% in December and ahead of forecasts of 0.4%, not only quite a bit higher than expected across all aggregates last month, but prior data was revised up as well. Treasury yields are rising fast after the Cleveland Fed's Loretta Mester said she saw a compelling case for a 50-bp rate hike at the February meeting. Mester also said the risk for inflation is to the upside and that the Fed may not achieve its 2% target until 2025. The dollar and treasury yields are rallying after the comments.
Rand continues to struggle
The rand remains on the back foot, and the hawkish comments did not help the cause. USD/ZAR is trading up around R18.20 currently, and we do think a lot of bad news is currently baked into the local currency.
Gold under pressure because of higher yields
Gold and other commodities are under pressure as higher yields in the US attract flows, and gold's safe haven status wanes. Recession fears that still exist are detrimental for palladium and platinum currently. Copper is also down after a big rally earlier in the year on the China reopening narrative. Everything feels very similar to where we were in Nov last year. The Fed and the US economic data will remain key in the short term.
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