Frustration grows for Dollar bulls

Gold notched its second record high of the week yesterday, touching $2,955 an ounce before making a small pullback. Safe-haven inflows have resumed once again in light of trade tariff posturing and the threat of a wider global trade war.

For now, such talk remains no more than a threat, to the frustration of many Dollar bulls. As Donald Trump begins his second month in office, many expected such tariffs to be set in stone at this point. The delays and uncertainty are leading to many traders losing patience with the long Dollar trade. The Greenback hit another yearly low yesterday, dragging the DXY down 0.77% to the low-106 range.

The Japanese Yen in particular took advantage of a weaker Dollar, which fell below 150 Yen on Thursday. Murmurs behind the scenes suggest the Bank of Japan could increase rates on the Yen during the summer. Recent data out of Japan certainly backs up such a possibility. On Monday, Japanese GDP crushed expectations, coming in far higher than anticipated. Data published this morning also suggests an uptick in inflation within the island nation, further bolstering the argument for a rate hike.

A reminder that Japan is in a completely different situation to most countries in this regard. For decades, the BoJ has maintained rates in and around 0% in a bid to stimulate growth, with mixed results. Current rates are the highest they have been since 2008 and unlike much of the rest of the world, are looking to go higher as opposed to lower.

The latest FOMC minutes did nothing to shift sentiments, as board members once again reiterated the need to see progress on inflation before committing to a rate cut. FedWatch did not budge an inch following the release, steadfastly clinging to a 95%+ chance of no change at the next meeting. Yawn.

The week is not over yet. The European session opens with UK retail sales and a slew of European manufacturing and services figures. Later on, Canadian retail sales and US PMIs wrap up the day’s events. One last push before the weekend.