Dollar continued to weaken after U.S. economic data released on Friday were below expectations while gold rose above $1,300 after edging lower in the early session. Fed’s policy decision to be announced on Wednesday will be under spotlight this week. Fed will update its projections and likely remain dovish while policymakers are expected to give signals about balance sheet reduction policy. In the meanwhile, Trump – Xi summit, which was announced not to happen in March, is claimed to be pushed back to June, considering that two sides will not be able to finalize a trade deal till April. In Japan, one of the most severely affected countries from trade war between U.S. and China, exports decreased in February for the third month while imports contracted more than expected, according to data released on Monday.
Gold closed last week at $1,302 level after hitting $1,311 as prices were supported by weakening dollar. On Monday, gold prices started week edging lower but then rose above $1,300 again as it recovered from the fall.
As of 15:21 GMT+3, gold was trading at $1,304.96 while dollar index was at 96.40. U.S. 10-year Treasury yield edged higher to 2.607.
U.S. Federal Reserve will announce its policy decision on Wednesday this week. Policymakers are expected to keep interest rate on hold and remain dovish while evaluation of economic outlook will be under spotlight. Possible change in the interest rate projections as well as more clarified messages on balance sheet reduction, which is claimed hurting financial markets, will be watched carefully since Fed officials reiterated they would continue being patient in deciding monetary policy because of slowdown seen in the U.S. and the world economy.
While it is still uncertain when U.S. and China will be reaching a trade deal, the possible summit between U.S. President Donald Trump and Chinese counterpart Xi Jinping, which was announced not happening in March, may be postponed to June, claimed South China Morning Post. added two sides wouldn’t be able to finalize the possible trade deal till April. According to the claim, main division within White House is “how much importance will be attached to an enforcement mechanism” to make sure Chinese side will keep the promises or whether it will be enough to agree on a deal in principle and declare success.” Two sides reiterated that trade talks were going well while President Trump said last week that, things would be clarified in the next three or four weeks and underlined there would not be any deal if it was not a good deal for the U.S. Where the possible summit between two leaders will be held is still uncertain but it is claimed that Trump and Xi may come together in Japan, where G20 summit will be held later in June.
In the meanwhile weak data keep coming from Japan, the third biggest economy in the world which is affected severely from trade war between U.S. and China. According to data released on Monday, exports declined in the third month in a row by 1.2% annually in February. Exports to U.S. and Europe held firm despite global economic slowdown while exports to Asia, which covers more than half of Japanese exports, continued to weaken. Exports to China, Japan’s biggest trade partner, falls 6.3% on average in January-February despite 5.5% increase in February. Imports also declined by 6.7% in February on annual basis. Thus, Bank of Japan is expected to be forced to ease its monetary policy considering weakness in exports and inflation which is well below 2% target.