Gold 1887,145
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EURUSD 1,2167
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DJIA 34468,50
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OIL.WTI 69,575
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DAX 15573,50
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The EUR/USD and GBP/USD have been in a tight corridor for the last few days. But all that could change as soon as today! Why? At 2.30pm US inflation data for May will be released.
EUR/USD
China’s producer price index was published on Wednesday. It rose immediately by 9% year-on-year, after rising 6.8% a month earlier. This has not been seen in 13 years, since September 2008. The reason for this increase remains the same: The appreciation of key commodities, which China is obliged to import. We are talking chiefly of iron ore and copper.
Monthly producer price data for China comes out slightly ahead of US data. In fact, they are a leading indicator. It’s a subtle hint that inflation continues to rise rapidly around the world. Which raises investor fears that US inflation data will also significantly exceed forecasts.
What can this lead to?
If the year-on-year consumer price index exceeds 5% (analysts expect 4.7%), we can expect a strong collapse in stock markets around the world on Thursday. U.S. Treasury yields would soar. And with it, the dollar will break out of the bandwagon and continue rising. This reaction will be based on the increased likelihood of a premature unwinding of the Fed stimulus and an increase in the discount rate.
In the EUR/USD this will lead to the risk of a renewal of the June lows at 1.1986. And in the GBP/USD it will lead to the removal of a huge amount of stops below 1.408, which have accumulated there over the past 3 weeks. It will be very interesting to watch the dynamics of gold. If it falls first on this negativity and then rallies back it will be a strong bullish signal. And the target of $2000 per troy ounce could be reached as early as June.
13.45 ECB interest rate decision
14.30 US Consumer Price Index for May
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