US GDP Fueled Gold Price Reversal Risk, USD Awaits Jerome Powell

Asia Pacific Market Open Talking Point

• The US Dollar soared on rosy GDP data as gold prices fell

• JPY/CHF weakened as geopolitical risks increased in Asia

• Asia stocks may pause declines, all eyes on Powell speech

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The US Dollar aimed higher against most of its major counterparts, boosted by a better-than-expected first estimate of fourth quarter GDP. Local front-end government bond yields rallied, singling increasingly hawkish Fed monetary policy expectations. This also boded ill for equities, which were already under pressure before the data release, as the S&P 500 closed lower for a third day.

Tensions between India and Pakistan as the Trump-Kim summit ended abruptly without an agreement were some of the causes of pessimism earlier in the day. These may have been why, unusually, we saw the anti-risk Japanese Yen weaken as its similarly-behaving cousin, the Swiss Franc, gain as a regional haven alternative. This is most clearly seen when looking at an intraday performance of JPY/CHF below.

JPY/CHF Fell as Asia Regional Risks Increased

Chart Created in TradingView

Some of the worst performing major currencies were the pro-risk Australian and New Zealand Dollars. Not only did they contend with a deterioration in risk appetite, but poor economic data also weighed them down. NZD/USD fell with souring business confidence. Soft Chinese manufacturing PMI data pressured AUD/USD lower as it underpinned economic growth slowing in the worlds second-largest economy. Gains in the US Dollar also boded ill for gold prices which turned lower this week so far as expected.

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Wall Street did trim some of its losses in the aftermath of commentary from US Trade Secretary Steven Mnuchin. He noted that there has been a lot of progress made in China trade talks. S&P 500 futures are pointing cautiously higher, perhaps leaving breathing space for Asia Pacific equities to pause some of their declines. Markets will be awaiting a speech from Fed Chair Jerome Powell.

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