Gold On the Decline as  Inflation Hedge Fades

Euro / LBP16,144.5016,173.00-0.18%-2.68%
Euro / Dollar1.07631.0782-0.18%-2.68%
NEER Index244.09243.550.22%1.34%


Lebanese Forex Market

The Lebanese Pound (LBP) remained steady within the new official rate of USD/LBP 15,000 by February 16, 2024.

The Lebanese exchange rate has maintained a relatively stable exchange rate of approximately 89,700 USD/LBP by February 16, 2024. It’s crucial to recognize that this stability isn’t backed by robust fundamentals despite recent approval of the 2024 Government Budget. Given the ongoing financial crisis and the absence of a recovery plan concerns persist due to uncertainties about Lebanon’s future and the broader regional context.

As for the Euro/LBP currency pair, the Euro depreciated against the dollar-pegged LBP with the currency pair going from last week €/LBP 16,173 to €/LBP 16,144.50 by February 16, 2024. The Nominal Effective Exchange Rate (NEER) of the Lebanese pound slightly increased by 0.22% standing at 244.09 points on February 16, 2024.

International Forex Market

The USD Index (DXY) increased by 0.25% to stand at 104.367 on February 16, 2024 as market pricing of Federal Reserve’s easing in 2024 has been reduced.
Despite avoiding recession, the US economy’s resilience means the Federal Reserve is likely to adopt a more measured approach to monetary easing in 2024. While interest rate cuts are still expected, their magnitude will be limited, which could provide some support for the US Dollar (USD) by preventing significant downward pressure.

The Euro depreciated against the dollar by 0.18% over the course of the week and reached EUR/USD 1.0763, partially due to a stronger US Dollar (USD). Euro area market players are eagerly awaiting an interest rate cut, but the European Central Bank insists wage data will dictate the timing. While some indicators suggest stabilizing or falling cost pressures, the Central bank is waiting for first quarter national account data before making a move. If there are no surprises, they still expect a rate cut in June.

The British Pound recorded a slight loss of 0.30% against the Dollar to stand at GBP/USD 1.2581 by February 16, 2024. The UK economy is facing a grim reality, with GDP per capita declining for seven straight quarters and a confirmed recession following contractions in the last two. This puts pressure on the government, already in a tight spot, and raises calls for the UK central bank to consider easing its current 5.25% interest rate to stimulate growth.

For other currencies in Europe, the USD/CHF edged higher by 0.78% by the end of this week to stand at USD/CHF 0.8813 on Friday February 16, 2024. Elsewhere, the USD/CNY remained stable as China is currently on New year’ holidays. Meanwhile, USD/JPY pair appreciated by 0.62% to stand at USD/JPY 150.23 on Friday February 16, 2024. Furthermore, the USD/CAD pair appreciated by 0.18% to stand at USD/CAD 1.3482 by February 16, 2024, while the AUD/USD saw a slight downtick of 0.08% to stand at 0.6518 by the end of this week.


Gold prices retreated this week and recorded a slight loss of 0.96% to stand at $2,004.66/ounce on February 16, 2024. In fact, hopes for an early Fed rate cut evaporated after fresh inflation data, sending US bond yields and the Dollar soaring. Both developments dealt a blow to Gold, whose appeal as an inflation hedge fades when other assets offer higher returns and a stronger currency. However, we believe a continued price recovery for the yellow metal is unlikely in the short term given the possible change in the monetary policies.

Despite ongoing tensions in the Middle East, oil prices held steady this week around $82.46/barrel by February 16, 2024. For stability reason, an implicit agreement seems have been reached to secure protection for oil flows crossing the Beb Al-Mandeb.  This stability comes amidst higher-than-expected US inflation data, which suggests interest rate hikes may be delayed, potentially leading to increased crude inventories and lower prices. OPEC further tightened the outlook by slightly lowering its forecast for non-OPEC oil supply growth in 2024, citing slower production increases in the US and Russia. This could put upward pressure on prices in the coming months, counteracting the potential effect of raising US inventories.

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