Daily Brief, January 25, 2023: Australia’s Inflation Reaches 33-Year High

Inflation in Australia Reaches its Highest Rates in 33 Years.

Australian inflation jumped in the last quarter of 2022 to the highest level in 33 years, driven by the rise in the cost of travel and electricity, as data from the Australian Bureau of Statistics showed that the consumer price index rose by 1.9% in the fourth quarter of the previous year, exceeding market expectations at 1.6%.

The annualized rate rose to 7.8% from 7.3%, the highest rate since 1990. As for the month of December, the consumer price index increased by 8.4% compared to the same month last year, up from 7.3% in November.

Bank of Canada to Announce Interest Rate Decision Today

The Bank of Canada would raise its benchmark rate of interest by a quarter point to 4.50% and then suspend its aggressive tightening campaign, with risks skewed toward a higher peak. Canada’s inflation rate is expected to remain greater than the central bank’s 2% aim throughout this year and until the third quarter of 2024. Knowing that inflation was at 6.3% in December 2022. 

The probability of the occurrence of an economic recession has increased to 65%, from 51% in the previous poll. 

Gold is Locked in a Narrow Range Ahead of US GDP Release.

Gold prices moved in a narrow range on Wednesday, January 25, as investors shied away from taking big bets ahead of the release of US economic data this week. Expectations that the Federal Reserve would slow the interest rate hikes kept the yellow metal attractive. The spot gold price settled at $1937.09 an ounce after hitting its highest level since late April 2022 yesterday, Tuesday. US gold futures rose 0.2% to $1,940.00.

The market’s focus now is on US Q4 GDP data due on Thursday, which could determine the pace of rate hikes during the US Federal Reserve’s policy meeting on January 31-February 1. If data proves that the US economy is slowing down and the central bank will soon loosen the tightening of its monetary policy and lower interest rates, gold could rally.

Most investors expect the bank to raise interest rates by 25 basis points at the policy meeting next week after slowing its hawkish pace to 50 basis points last month following four consecutive increases of 75 basis points each. With lower interest rates trimming returns on assets such as government bonds, investors may prefer non-yielding gold as a haven from interest volatility.

Meanwhile, the dollar index fell 0.1%, and the dollar’s weakness tends to make gold more attractive to buyers carrying foreign currencies.

For other precious metals, silver fell in spot transactions by 0.2% to $23.62 an ounce, and platinum fell by 0.2% to $1,054.40. However, palladium rose 0.1% to $1,745.38.

Microsoft Achieves Higher-Than-Expected Profits.

Microsoft stock rose in the trading hours that followed the end of the session on Tuesday. Prior, the company announced its quarterly results for the second fiscal quarter, which exceeded expectations. Microsoft’s total revenue increased 2% year over year in the quarter that ended December 31st, the lowest quarterly rate since 2016.

Net income decreased to $16.43 billion from $18.77 billion during the same period a year ago. Still, the company incurred costs of about $1.2 billion during the last quarter of 2022 due to its decision to cut 10,000 jobs and review its equipment and lease contracts.

Microsoft’s revenues from the cloud computing unit amounted to about $21.51 billion, an increase of 18% and higher than expectations of $21.44 billion. LinkedIn revenues recorded about $ 17 billion, an increase of 7% from market expectations which have aimed at achieving revenues of about $ 16.79 billion.

Excluding certain items, Microsoft’s adjusted earnings were approximately $2.32 per share in the latest quarter of 2022, compared to a forecast of $2.29 per share. The company’s total quarterly revenue was $52.75 billion.‏

US Indices Close Mixed Yesterday.

The performance of US indices varied at the closing of yesterday’s trading session, after the results of the companies’ earnings, in addition to evaluating the economic data issued.

The activity of US companies contracted in January for the seventh month in a row. Still, the pace of contraction slowed in the manufacturing and services sectors for the first time since September, and corporate confidence increased with the start of the new year.

Dow Jones rose by 0.3%, or about 140 points, to 33,734 points, while the S&P 500 fell by 0.07%, to 4,017 points, while the Nasdaq fell by 0.3%, to 11,334 points.

Disclaimer: This article is not investment advice or an investment recommendation and should not be considered as such. The information above is not an invitation to trade and it does not guarantee or predict future performance. The investor is solely responsible for the risk of their decisions. The analysis and commentary presented do not include any consideration of your personal investment objectives, financial circumstances, or needs.

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