- The Turkish lira is trying to bounce back on the central bank downplaying guarantees for a rate cut in April.
- The Australian dollar is under pressure on escalating China-Australia trade tensions.
- Gold is struggling for direction amid dollar strength and rising yields.
A vicious trade stand-off between China and Australia is the talk at the start of the week as relations between the two trading powers deteriorate. Beijing imposing new anti-dumping tariffs on Australian wine is the latest tailwind weighing heavily on the Australian dollar. The Turkish lira is holding steady after imploding on the new central bank head, downplaying the push for a further rate cut.
The British pound is the most resilient at the start of the week, strengthening against the other majors. The pound is gaining the yen, which is under pressure amid talk of new lockdown measures as COVID-19 cases continue to spike in some cities. Gold, on the other hand, is at risk of plunging further amid dollar strength.
Turkey’s rate cut
The Turkish lira bounces back against the greenback received a boost even as an upheaval at the country’s central bank negatively impacted its sentiments among traders. The lira gained some ground against the dollar as the new central bank chief Sahap Kavcioglu reiterated that a 1-week repo-rate remains the central bank’s primary policy tool.
The remarks have helped steady the USD/TRY, which had rallied to nine-month highs as President Recep Erdogan fired the central bank chief over rate hikes. The new leader appears to be following through on the president’s wishes, although he has confirmed that the proposed rate cut in April is not guaranteed.
Amid the Turkish lira’s stability, the Australian dollar is under immense pressure as tensions with China continue to edge higher. China imposing new anti-dumping tariffs threaten to affect trade relations between the two nations.
The new anti-dumping tariffs, which began over the weekend, will see imports for Australian wine subjected to between 116.2% and 218.4%. The Australian dollar also took a hit on coronavirus wages subsidy coming to an end.
As it stands, close to 100,000 people are at risk of losing their jobs. The unemployment rate should tick higher to 6% before recovery comes into play sometime in the second half of the year. The euro, which has been the weakest among the major, is already strengthening against the Aussie.
The EUR/AUD pair has bounced off one-week lows at the start of the week. According to the chart above, it is clear bulls are looking to engage on a break of hourly resistance.
The pound strength
The British pound also continues to crush the Australian dollar and the yen as it remains resilient against the dollar. The sterling has rallied significantly against the majors in recent days as bulls continue to bet on the UK economic recovery.
The Japanese yen has felt the full wrath of resurgence sterling. GBP/JPY has continued to edge higher. Fuelling the upside run is an escalating COVID-19 situation in Osaka. The city authorities have already asked the government for new COVID-19 measures to help curtail further infections.
With over 45% of the UK’s population already vaccinated, hopes of economic recovery are edging higher, conversely helping fueling strength on the pound against the AUD and the yen.
The gold weakness
In the commodity markets, gold upside attempts remain limited. The precious metal has experienced strong resistance at the $1,740 an ounce level and now looks susceptible to further declines owing to the dollar strength across the board.
The US dollar continues to draw in bids at the back of economic recovery and successful vaccine campaigns in the US, conversely sending the yellow metal lower.
Gold faces a tough time to break through the $1,740 resistance level from where sellers have consistently come through and pushed the metal lower. On the downside, support is seen at the $1,722 an ounce level, a breach of which could see the metal plunging back to the $1,700 an ounce level.