Gold In Spotlight Amid Another Rate Hike Expectation

Lebanese Forex Market

The Lebanese Pound (LBP) remained steady within the new official rate of USD/LBP 15,000 by September 01, 2023.

On the parallel market, the Lebanese national currency remained steady this week with almost same average as previous week of 89,480 LBP/USD. The pair LBP/USD recorded a minimum of 89,400 LBP/USD and a maximum of 89,600 LBP/USD during the course of this week. Despite the Lebanese parallel market rate remaining steady, a significant level of uncertainty lingers, particularly due to the country’s political situation and the governance of the Central Bank drawing increased attention.

As for the Euro/LBP currency pair, the Euro appreciated against the dollar-pegged LBP with the currency pair going down from last week €/LBP 16,167.01 to €/LBP 16,281 by September 01, 2023. The Nominal Effective Exchange Rate (NEER) of the Lebanese pound registered a slight increase during the course of the week to stand at 236.99 points on September 01, 2023.

International Forex Market

This week, the dollar index is currently fluctuating within the range of 103.55 on Friday September 01, 2023 due to increasing caution ahead of significant data releases on the US economic calendar this week. Meanwhile, the dollar continues to receive support from the strong performance of the US economy, reigniting discussions about the Federal Reserve maintaining a tight monetary policy stance for an extended period. On the other side, there is a growing notion that the dollar might encounter challenges due to the Fed’s upcoming decision, especially given the ongoing trend of disinflation and a cooling labor market, which has gained some momentum recently.

The Euro currency managed to regain balance against the US dollar this week retaking the level of EUR/USD 1.0851 by Friday Sept 01, 2023 up from 1.0776 last week. The modest advance in the pair comes in line with the offered stance in the Greenback despite the great extent of uncertainty regarding the potential steps of the ECB amid a divided Governing Council and rising speculation that a stagflation scenario could be developing in the Eurozone.

Meanwhile the British pound gained momentum by the end of this week but stabilized below of 1.2700 at GBP/USD 1.2679 while concerns of a recession in the UK economy grew on the belief that the BoE would keep interest rates higher. Inflation in UK is the highest among G7 economies, which requires a tight interest rate policy for a longer period despite softer energy prices.

Meanwhile in Europe, Swiss currency traded 0.51% lower by Friday September 01, 2023 at 0.8817 down from previous week. The Swiss Franc is experiencing downward action against the dollar although yearly Switzerland’s CPI for August showed that Swiss inflation remained consistent at the rate of 1.6% slightly above the 1.5% market expectations.

As for the Japanese currency, the USD/JPY pair ended the week on a negative ground extending losses for the last two days of the week to stand at USD/ JPY 145.47 down from 146.03 previous weeks.

Elsewhere, the Australian appreciated by 0.83% from the previous week to stand at 0.6472 AUD/USD while the Canadian dollar dropped by the end of this week by 0.49% to 1.3508 USD/CAD.

Commodities

Gold price recorded further gains by the end of this week by 1.50% and reached 1,941.8/ounce on Friday September 01, 2023. In fact, Gold price suitably depicts the market’s behavior regarding the Fed next move, as the latest round of US economics was not supportive to tight policy. Also, the higher gold price is consistent with the slightly weaker US dollar.

As for crude oil, prices jumped by 3.66% for the second consecutive week to stand at $87.06 per barrel on September 01, 2023. Oil markets extended the multi-session rally and closed on three-week tops backed by increasing open interest and volume of future oil contracts, which supported the current trend of the market.