The European Central Bank's dove voice"pushes the US dollar higher, and the price of gold suffers a blow to the head

On Thursday evening, the European Central Bank announced its interest rate decision, keeping the three key interest rates unchanged, in line with market expectations. The euro plunged 65 points against the dollar in the short-term and continued to fall after Lagarde’s speech. The dollar index rose all the way and returned to the 100 mark. After the rally, the intraday gain expanded to 1%. A stronger dollar dragged down the short-term decline in spot gold to $10 and closed at $/oz.

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The European Central Bank said it said the Russian-Ukrainian conflict was causing great pain, which was also affecting economies in Europe and beyond. Soaring energy and commodity prices are reducing demand and dampening production.

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European Central Bank President Christine Lagarde also emphasized at a press conference that the conflict between Russia and Ukraine has seriously affected people's confidence, and acknowledged that the upside risks to the inflation outlook have increased in the near future. Inflation will remain elevated in the coming months, and early signs of inflation expectations above target are cause for concern.

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The main reason for the appreciation of the U.S. dollar is that the economic recovery of the United States is stronger relative to the economies in the U.S. dollar index. In particular, the U.S. labor market is better than that of other currency economies in the U.S. dollar index. At the same time, inflationary pressures have led to a clear tightening cycle of Fed monetary policy.

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In March, the Fed raised interest rates by 25 basis points, marking the beginning of this round of tightening cycle. Referring to the real yield performance of US bonds after Bernanke proposed Taper in the last round in 2013, we believe that in this round of tightening cycle, the real yield of US bonds The rate is expected to quickly climb to the historical center of 0%-1%, and the real yield of U.S. Treasuries has also risen rapidly to -0.15% recently, and it is expected that there will still be strong upward momentum in the future. The continued upward trend in real yields will put pressure on gold prices

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The latest US March PPI rose 1.4% month-on-month, a new high since August 2012, and is expected to rise 1.1%, the previous value rose 0.8%; a year-on-year increase of 11.2%, a new high since 2010, the previously announced US March CPI year-on-year It rose by 8.5%, continuing to set a new high in more than 40 years, and the increase was also higher than market expectations.

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The main reasons for this round of historically rare high inflation in the United States are as follows: On the one hand, rising oil prices, especially the lack of elasticity in the supply of shale oil – U.S. shale oil, as an important participant in disturbing the balance of the global crude oil market, has experienced a rapid Investors began to demand a more stable return on investment after the capital expenditure of The number of rigs has not risen rapidly to fill the supply gap; on the other hand, the shortage of the US labor market is relatively serious.

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According to data disclosed by the U.S. Department of Labor, the number of non-agricultural job vacancies in the United States in February 2022 reached 11.266 million, significantly exceeding the historical average. Due to factors such as the epidemic, the labor market supply is insufficient. At present, the above factors are still difficult to alleviate significantly in the short term.

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In the short term, the focus of the Fed is still to control inflation, and the intensity of monetary policy will not be reduced.

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Recently, Biden publicly accused Russia's actions in Ukraine as "genocide". "Yes, I call it 'genocide'. It's becoming clear that Putin is even trying to wipe out any notion of being Ukrainian."

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Reuters commented that Biden's latest remarks were a "major escalation." CNN believes that the new statement seems to be the latest example of Biden's sentimental views on the Russian-Ukrainian war ahead of the official US characterization. Matthew Miller, an adviser to the U.S. National Security Council, told U.S. media that the U.S. is working with allies to investigate Russia’s war crimes, which is a “long process.”

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Due to the strict legal definition of the term "genocide" and the heavy meaning of this accusation, the US has not used the term "genocide" before. Although a White House official quickly clarified that the United States' position not to directly intervene militarily in the Ukraine crisis remains unchanged, such remarks will undoubtedly exacerbate the rift between the two great powers.

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At the same time, the US military aid to Ukraine is constantly increasing and breaking through the "restrictions", and Washington and London are still discussing speeding up the supply of weapons to Kyiv, all of which have made the outside world see the risk that the conflict may expand. According to media reports, the Pentagon on the 13th will host the heads of eight major US arms manufacturers to discuss a "long-term war plan" in Ukraine.

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Russian President Vladimir Putin said that the special military operation in Ukraine is "the right step, there is no choice, the goal will be achieved". These remarks once again showed Russia's tough stance, and further aroused speculation that Russia will launch the "Donbass Battle" in the near future. The geopolitical chaos is an important support for gold prices to strengthen in the medium term.