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Gold wavering, dollar up, ECB caught in a trap

The gold price has eased down following a dollar rally, the greenback having previously plunged to multi-month lows. Spot gold fell 0.2% to $1,240.11 at 07:02 GMT. US gold futures for August delivery fell 0.2% to $1,239.50.

On the continent the European Central Bank (ECB) has been in two minds. Last June we reported that the ECB was struggling to reconcile winding down their stimulus program with the below-target inflation rates in Europe.

Yet according to Stephanie Lindeck, Economist at Julius Baer, despite wild market speculation, the ECB has no desire to stop quantitative easing.

Market speculation over the QE policy being wound down stems from the election of Emmanuel Macron over Marine Le Pen says Lindeck, and has brought the expectation of winding down forward a year in just four weeks. In light of such expectations, eurozone bond yields have increased sharply, and the euro rose against the dollar to nearly 1.15, the highest level since March of last year.

However, the economic reality is different argues Lindeck. “Slack in the labour market and a still sizeable output gap keeps inflation pressure muted. Today’s June estimates, with annual inflation of consumer prices at 1.3% and core inflation at 1.1%, clearly show that the ECB is in no hurry to pull back, and should rather continue its asset purchasing programme beyond the current time frame of December 2017”, says Lindeck.

Another economist at Julius Baer, David A. Meier, suggests the sentiment is the same in the UK: “We expect the BoE to remain calm and resist the temptation to hike rates, at least as long as the negotiations with the EU do not yield more visibility on the shape the Brexit will take. Yesterday’s inflation data will help the BoE enjoy a more relaxed summer.”

Photo Credit: olio. Via istock

Link to this article: : http://www.goldmadesimplenews.com/gold/gold-wavering-dollar-up-ecb-caught-in-a-trap-13282/

Posted by on Jul 19 2017. Filed under Gold News, Markets. You can follow any responses to this entry through the RSS 2.0. You can skip to the end and leave a response. Pinging is currently not allowed.

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