Gold gains amid falling risk sentiment

Daily Analysis - 08/04/2016

The precious metal posted another day of strong gains

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With the Japanese yen taking a wild ride and Oil prices erasing gains from the previous day, the risk off sentiment in the market, sent Gold prices higher yesterday, rallying over 1.47% to close at $1241 an ounce. Gold has been one of the best performing assets this year, rising nearly 16.0% in the first quarter of 2016.

Yen, unrelenting as BoJ put in a corner

USDJPY continued to gain momentum as the dollar fell to an 18-month low against the yen in yesterday's trading. Knocking off the crucial 110Yen level, USDJPY fell 1.40% yesterday to close at 108.18Yen. Comments from Japan's chief cabinet minister, Suga fell on deaf ears as he said that the authorities were keeping a close eye on the exchange rate. Japan and the BoJ is caught in a corner as the general assumption has been not to intervene in the markets. However, the rapid appreciation in the yen has sent the Nikkei225 weaker and one of the worst performing indices this year. Economic data from Japan remains weak and a stronger yen is likely to hit exports even more.

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ECB releases meeting minutes from March

The ECB's meeting minutes from the March policy meeting was released yesterday. The meeting shows that there was a broad agreement among the Governing Council members on the easing package which saw broad cuts to interest rates and QE being expanded. The issue was however about the cost and benefits of the policy actions that were taken. The minutes showed that some of the members felt that the ECB's newly launched TLTRO-II was rather "generous" and could contribute to preserving weak business models by some banks. Although the euro rallied following Mario Draghi's comments on the March 10th ECB press conference that rates will not be cut further for the time being, the minutes showed that further adverse shocks could see the ECB take action including cutting rates further. The ECB will be meeting next on April 21st

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UK manufacturing expected to contract 0.20% in February

UK's manufacturing and industrial production numbers are due for release today by the Office for National Statistics. Analysts forecast a contraction of 0.20% in manufacturing production on a month over month basis in February, while expecting to see a decline of 0.70% in the twelve months ending February. Industrial production data is also due with expectations for a flat print on an annualized basis, while month over month, UK's industrial production is expected to rise 0.10%, down from January's 0.30% increase. According to the manufacturing PMI released by Markit earlier, data showed a subdued pace of growth in the first quarter, adding to the downside risks for today's release. Even in the event of a surprise reading, the risks are in favor of weaker prints going forward as UK is now struggling as UK's steel manufacturer, Tata Steel is scaling down its operations, which most certainly is expected to hit the manufacturing sector.

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Canada’s March jobs report to show unemployment rate unchanged at 7.30%

The monthly jobs report from Canada for the month of March is expected to be released at 12:30 GMT today. Following the 2.3k contraction in jobs in the month of February, analysts expect a strong recovery with the Canadian labor market expected to add 10.4k jobs during March. The unemployment rate is expected to stay put at 7.30%, unchanged from a month ago. Economic data from Canada, although started on a strong footing in January started to fizzle as the recent appreciation in the Canadian dollar's exchange rate has started to take its toll, mostly with exports falling and trade deficit widening more than expected. The recovery in Oil prices is expected to stem the tide for the moment.

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