Amid an overall dollar weakening and investor expectations that the Fed will delay tapering due to signs of a slowdown in the labor market, gold remained near the $1818 per ounce level on Tuesday, close to levels not seen since late June.
Currently, the interest rate market seems to be pricing in the possibility of a hike in the first half of 2023. This week, Thursday to be exact, the European Central Bank's monetary policy decision could also be crucial for the markets. Investors are looking for clues as to when the central bank will start tapering its massive pandemic-era stimulus, including the PEPP program. At the same time, the spread of the delta virus and concerns about its impact on the economic recovery could continue to support gold, pushing back the topic of interest rate hikes.
In the cryptocurrency market, on the other hand, bitcoin seems to have crossed the $52,500 per coin level on the day El Salvador introduced the cryptocurrency as legal tender alongside the US dollar. El Salvador as a country does not have its own currency, and by legalizing bitcoin it wants to cut itself off from U.S. companies that process money orders or card payments. In other words, it wants to introduce bitcoin and use it for the purposes for which it was created. However, polls show that for the moment, most Salvadorans are skeptical of the idea.The whole process will be worth watching because it is an unprecedented event in the world. In the first stage of cryptocurrency adoption as legal tender, El Salvador has already purchased 400 BTC for more than $21 million.
Meanwhile, in the currency market, attention may once again be drawn to currencies from the Antipodes, where the Reserve Bank of Australia (RBA) kept the interest rate at a record low of 0.1 percent at its September meeting, in line with widespread expectations, while reaffirming plans to limit government bond purchases to AUD 4 billion per week and stating that it will do so until at least mid-February 2022. On the economic outlook, the central bank said GDP is expected to decline significantly in Q3 and the unemployment rate to rise in the coming months. As vaccination rates continue to rise and restrictions ease, the economy should rebound, the bank added. However, the board noted that the timing and pace of that rebound will likely be slower than at the beginning of the year. Policymakers reaffirmed their commitment to maintain supportive monetary conditions and not raise the cash rate until inflation is in the target range of 2-3 percent, a target that will not be met before 2024.
New Zealand, on the other hand, revived the topic of interest rate hikes, which would have already taken place had it not been for the emergence of the Covid-19 cases and the imposition of the lockdown on a day when the RBNZ was already expected to raise rates. Currently looking at the NZ bond market, yields have risen above 1.9 percent, to their highest level since 2019. Thus, the market may assume a rate hike at the next RBNZ meeting, which will take place in early October.
Daniel Kostecki, chief analyst at Conotoxia Ltd. (Forex service Cinkciarz.pl)
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