GOLD & CRUDE OIL TALKING POINTS:
- Gold, crude oil prices drop as dovish ECB stokes US Dollar[1] rally
- All eyes on Q1 US GDP data before next week’s FOMC[2] meeting
- Upside surprise may push gold through critical 2018 range floor
Gold prices plunged after a drop in the EUR/USD[3] exchange rate echoed as broad-based US Dollar strength across the financial markets, weighing on the standby anti-fiat alternative. The move was sparked by a chastened tone from ECB President Mario Draghi, who signaled the central bank is far from settled on whether unwinding QE asset purchases is in the cardsthis year.
Crude oil prices likewise at the hands of the greenback’s ECB-inspired surge. The sentiment-sensitive WTI benchmark had been tracking share prices higher when Mr Draghi’s comments hit the wires and promptly turned lower. Oil prices are denominated in terms of the US currency on global markets, so it seems hardly surprising that an outsized move there made impression.
US GDP DATA MAY HURT COMMODITY PRICES
Looking ahead, the US GDP data is firmly in focus. The annualized growth rate is expected to register at 2 percent in the first quarter after, down from 2.9 percent in the final three months of 2017. Leading PMI survey data hints otherwise however, hinting at the possibility for an upside surprise. US data outcomes have also improved relative to forecasts in recent weeks, bolstering the case for a rosier result.
A better-than-expected GDP print may amplify bets on an accelerated Fed interest rate hike cycle, a theme already developing across financial markets[4]. That seems likely
