Spreadex Market Update
Financial Market Report: Gold Slides as BOC Surprises with Rate Hike
Gold prices took a hit as Treasury yields rose following an unexpected rate hike by the Bank of Canada (BOC). The market was caught off guard by the BOC's decision to tighten policy, which increased the chances of the US Federal Reserve following suit. In addition, other key factors impacted the financial markets, including crude oil inventory drawdown, Japan's GDP performance, and the influence of higher yields on the Australian and New Zealand currencies.
The Big News
In a surprising move, the Bank of Canada (BOC) decided to hike interest rates by 25bps to 4.75%. This unexpected tightening of policy sent shockwaves through the financial markets, leading to a rise in Treasury yields and a subsequent decline in gold prices. The BOC cited a stronger-than-expected economy and wage growth as the rationale behind their decision, but investors were left uncertain about future rate adjustments. As a result, the USD/CAD pair experienced some volatility, with downside risks looming if the $1.33 support level is breached.
Another significant development was the Energy Information Administration's (EIA) report of a crude inventory drawdown of 0.5M barrels, confounding expectations of a build. This news provided some relief to the crude oil market, as WTI prices rebounded by 1.32%. However, the commodity remains within a consolidative range, with a potential upward bias above $71 per barrel.
Japan's Q1 GDP outperformed expectations, with growth reaching 0.7%, supported by an annual rate of 2.7%. However, the increased pace of foreign travel contributed to yen weakness, as the USD/JPY pair climbed to 140.06. The battle for dominance between 139.00 and 140.50 is intensifying, and further movements will likely be driven by economic factors and market sentiment.
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