The US Dollar is extending its recent rebound on Tuesday, as risk sentiment remains cautious following the release of China’s economic growth data.
The Chinese economy grew at the second-slowest rate since the 1970s, yet exceeded expectations for the fourth quarter. China’s GDP grew 2.9% year-over-year in the fourth quarter, according to official statistics issued by the National Bureau of Statistics (NBS) on Tuesday, above the 1.8% consensus prediction and decelerating from the 3.9% growth rate in the previous quarter.
US Dollar Rebounds
The Chinese GDP expanded 3.0% yearly in 2022. While China’s industrial production climbed 1.3% compared to 0.5% projected and 2.1% earlier, the country’s retail sales declined 1.8% in December compared to 7.8% forecast and 5.9% previously.
Ahead of Wednesday’s crucial Bank of Japan (BoJ) policy announcement, investors are becoming increasingly concerned as they analyze Chinese data. In the meantime, the US Treasury’s announcement that Treasury Secretary Janet Yellen will hold her first face-to-face meeting with Chinese Vice Premier Liu He on January 18 in Zurich further unsettles markets.
Asian stocks are a mixed bag, with losses in Chinese companies offsetting a relief surge in the Japanese benchmark index, the Nikkei 225, ahead of the BoJ decision. Futures on the S&P 500 are down 0.11 percent on the day.
AUD/USD and NZD/USD are maintaining their rebound gains in the wake of positive Chinese GDP data and ahead of expected US-China meetings. USD/CAD is approaching lows around 1.3400 as the Canadian Dollar capitalizes on a 1% increase in the price of WTI.
The price of US crude oil is approaching $80 per barrel as the demand outlook for 2023 improves. Despite a small drop in the US Dollar and positive US Treasury bond yields across the curve, EUR/USD remains supported around 1.0800. The Euro remains supported by the hawkish statements of European Central Bank policymakers.
In an interview, CB Chief Economist Philip Lane stated that interest rates must be higher than they are currently.
Gold Retreats From Its Peak
During Tuesday’s trading session, Gold prices rose somewhat, but by the end of the day, they had retreated from their daily highs and turned bearish.
Tuesday’s trading session began with a rise in the gold market, but as we approached extreme levels, gains were retraced. Frankly, I believe we have gone way too far at this moment, so I believe a pullback is inevitable.
This retreat should inform us as to whether there are buyers looking to capitalize on the value below. This is my expectation, and I am particularly interested in purchasing about $1850 or $1875 per share.
The gold price is staying slightly above the $1,900 mark, but the downside appears to be limited due to dovish Fed rate hike forecasts.