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The National Australia Bank business survey for April 2025 shows a shift in business confidence from -4 to -1. Business conditions decreased slightly, moving from +3 to +2, which is notably below the long-term average.
Within the measured subcategories, the sales index remained stable at +5, and employment also held steady at +4. However, profitability saw a decline, dropping 4 points to -4, attributed to increased purchase costs affecting margins. The capital spending index experienced a 6-point decrease to +1, reflecting hesitation in new investments amid uncertainty over US trade policy.
Interest Rate Expectations
The Reserve Bank of Australia is expected to cut interest rates in its upcoming meeting on May 20. This potential rate cut may bolster sentiment in the business community.
Taken together, these numbers give us a snapshot of a private sector that is hesitating rather than retreating entirely. Confidence had been deeply negative, so the slight lift from -4 to -1 might seem minor at first glance, but traders should not overlook the timing—it comes just ahead of a likely rate move. Conditions, while still in positive territory, have lost some momentum, slipping to +2 and dipping under the historical norm, which raises questions about how sustainable current activity levels truly are.
Sales and employment holding firm suggests that day-to-day operations continue with some resilience. When revenue and staffing remain steady, it usually means short-term demand hasn’t deteriorated. However, it’s the profitability reading that draws the most attention. A fall into negative territory, especially driven by rising purchase costs, tells us that firms are facing growing margin pressure. They’re selling, they’re hiring, but they’re making less money doing it. That squeeze can’t go on too long without other parts of the business being affected.
What’s more, the sharp drop in capital expenditure—from a reasonably solid +7 down to +1—gives a clear message: companies are pulling back on future-facing commitments. That doesn’t come from nowhere. The report connects this cool-off in capex to trade policy uncertainty in the United States. When firms are unsure about external demand or the stability of international supply flows, they often park investment decisions. That now appears to be happening.
Market Sentiment and Derivatives
For those of us watching this from a derivatives angle, the likely RBA rate cut on May 20 has already started to shape sentiment. While the market has priced in the move to an extent, the impact on options pricing, especially near-term volatility on rates and currency products, could widen more rapidly if the central bank takes a cautious tone when delivering its guidance. The slight bump in business confidence appears to reflect an expectation that monetary easing will continue, but if that support fails to materially lift conditions or restore profitability margins, the next round of macro releases could act as stronger market catalysts.
One way to interpret the numbers is this: the domestic economy isn’t contracting, but it’s waiting. Waiting for clarity on global headwinds, waiting for cheaper borrowing costs to flow through—waiting, in short, for the next reason to act decisively. From our perspective, this kind of stall pattern can leave pricing susceptible to sudden revaluations, especially in short tenor instruments.
Track spreads between employment and profitability indices. When hiring remains constant but margins narrow significantly, something usually gives. Keep close to implied volatilities around that May 20 date—should forward-looking indicators start to hint at further margin contraction, implied rates could dislocate from currently assumed forward paths.
We are now in a situation where firms are doing just enough to maintain stability, with early signs that any external pressure could push them into retraction. Pay particular attention to sectors sensitive to overseas inputs or US-exposed export flows—additional news on tariffs or trade route shifts could bring abrupt shifts in equity-linked derivatives or sector-specific hedging behaviours.
Branch out from central bank forecasts. This report shows us that even with rate cuts, the problem may lie more in confidence and profits than in borrowing costs. That’s a shift worth modelling.
West Texas Intermediate (WTI) Oil prices decreased early in the European session on Tuesday, with WTI trading at $61.53 per barrel down from Monday’s $61.60. Brent crude also saw a small decline, trading at $64.66 after a previous close of $64.71.
WTI Oil, a high-quality crude type, is sold internationally and considered easy to refine due to its low gravity and sulphur content. It is sourced in the United States and distributed from the Cushing hub, a major conduit for oil transportation. The price of WTI Oil is influenced by supply and demand dynamics, global growth trends, political instability, and OPEC’s production decisions.
Weekly Oil Inventory Data Importance
Weekly oil inventory data from the American Petroleum Institute (API) and the Energy Information Agency (EIA) are crucial. Changes in inventories can indicate shifts in supply or demand: an inventory drop often signals increased demand, while higher inventories suggest increased supply. OPEC decisions on production quotas greatly impact prices, as lowering quotas tends to raise prices by tightening supply. Meanwhile, production increases can drive prices down.
This pullback in WTI and Brent reflects more than a minor adjustment. While price movements of just a few cents may seem uneventful on the surface, the underlying balance of supply assumptions and sentiment reveals broader hesitation. WTI’s mild retreat to $61.53 opens a narrow window of opportunity. It comes against the backdrop of sensitive supply mechanisms and subtle shifts in demand expectations, particularly from refiners stepping down activity in Asia and parts of the southern US amid upcoming seasonal maintenance.
The key for us—particularly those positioning in shorter-dated contracts—is how inventory figures unfold in the days ahead. Last week showed a surprise build in crude stocks, not wildly out of range, but enough to sap momentum from the bulls and trigger modest exits. If the API or EIA data this time mirror that tone—especially if simultaneous signs point to sluggish drawdowns in distillates—we may see continued downward pressure, at least through the front-month contracts.
We also need to be mindful of the ripple effects of OPEC+ behaviour. Their language around production targets has recently become more cautious, even non-committal at times. Riyadh and its core group within the organisation appear to be loosely aligned on holding output steady through the early summer period. But any deviation—particularly if one of the secondary producers, say Angola or Iraq, veers from voluntary limits—could produce uneven reaction across futures.
Impact of OPEC Decisions and Market Structure
It’s equally important to watch physical demand signals outside of the inventory datasets. Spreads between regional benchmarks—say, the WTI-Brent differential—are narrowing, suggesting decreasing transport flows and marginal arb trades drying up. For those managing calendar spreads or holding straddles, it means a potentially flatter structure in the near term. The classic contango or steep backwardation that’s often rewarded with directional bets may soften unless there’s a clear macro driver or geopolitical pulse shift.
Derivative volumes in fuel-linked contracts have thinned modestly week-on-week. The lower liquidity weighs on order books and can exaggerate intraday price moves with less capital. This can create intraday mispricings—opportunities, perhaps, for those willing to engage with tighter stops and rigorous execution discipline. But we aren’t in a runaway market—underlying volatility measures remain underwhelming, and implied vol in December and March expiry contracts has barely moved.
For now, strategy leans defensive. There’s little incentive to extend leverage until we see firmer justification from physical data or a breakdown in OPEC messaging. Risk skew is gently favouring puts over calls, echoing fatigue among long-biased flows. So any coverage of upside should be tight and short-dated. Long gamma positions remain unfavourable at current vols unless we expect surprise policy moves or sharp supply interruptions—not something we see in the immediate term from Gulf producers.
As ever, the Cushing delivery point bears watching more closely when WTI prices hover near stable support levels. An increase in stockpiles there over the incoming week would signal waning throughput demand. That, in turn, reinforces what we’re seeing in the futures curve—bearish flattening, fewer rolling incentives.
We’re not in a broken market, far from it. But for directional conviction to gather pace again—either way—it will require credible shifts in spot inventories or a meaningful political curveball. Until then, hold balance. Trade what’s in front of you, not what’s expected next month.
Apple shares jumped after news broke of a temporary pause in US tariffs on Chinese goods, offering some relief to investors worried about the company’s exposure to trade tensions. The move comes at a crucial time for Apple, which has been under growing pressure because of its strong dependence on Chinese manufacturing.
Apple shares surge as tariff truce offers short-term relief
Apple Inc. (AAPL) saw its share price jump by 6.1% on Monday, closing at USD 210.79, after former President Donald Trump confirmed a 90-day pause on elevated tariffs targeting Chinese imports.
The announcement helped calm investor nerves, particularly given Apple’s substantial dependence on manufacturing in China.
This rally positioned Apple as one of the top performers among the ‘Magnificent Seven’ tech stocks, despite the broader year-to-date picture remaining negative.
Tariff risk still looms despite relief
So far in 2025, AAPL shares are still down over 13%, pressured by persistent geopolitical tensions and ongoing concerns around supply chain stability.
Back in April, Trump’s declaration that tariffs on Chinese goods could rise as high as 145% rattled markets.
Apple shares fell sharply following the news, as roughly 90% of iPhones—which contribute nearly half of Apple’s quarterly revenue—are assembled in China.
During the company’s 1 May earnings call, CEO Tim Cook acknowledged the risks and outlined plans to expand iPhone production in India.
While this move aims to diversify Apple’s manufacturing footprint and reduce reliance on China, it also introduces potential logistical challenges and increased production costs, which could weigh on profit margins in the short term.
The new, reduced 30% tariff rate, set for the 90-day window, provides temporary relief but does little to eliminate uncertainty around long-term trade relations.
Trump also suggested Apple is planning substantial domestic investment, claiming in a Monday press conference: “I spoke to Tim Cook this morning… he’s going to be building a lot of plants in the United States for Apple.”
He hinted at a possible USD 500 billion reshoring roadmap, though no formal details have been confirmed.
Technical analysis: Apple eyes further gains after strong breakout
Apple (AAPL) has staged a strong technical rebound, rallying from a recent low of USD 193.24 to push beyond the key USD 210 resistance level, peaking at USD 211.35.
This move was accompanied by a bullish MACD crossover and a notable expansion in histogram bars—indicators of solid short-term momentum.
AAPL rebounds from USD 193 low, rallies to USD 211 peak with momentum cooling, as seen on the VT Markets app.
Currently, the stock is consolidating above the 10-period moving average, while the 30-period MA begins to slope upward—a technical shift often supportive of continued upside momentum.
Despite minor cooling in MACD strength and histogram compression, the price remains resilient above USD 208, suggesting buy-the-dip activity is still in play.
If the structure of higher lows remains intact and AAPL can break cleanly above USD 211.35, a push towards the USD 213–USD 215 zone appears feasible in the coming sessions.
Although the recent tariff pause has buoyed short-term sentiment and triggered a sharp recovery in Apple’s share price, the broader outlook remains mixed.
Much of Apple’s near-term performance may hinge on how well the company navigates its evolving production strategy across China, India, and potentially the United States.
Diversifying manufacturing is a sensible move to reduce geopolitical risk, but it also brings higher operational costs, logistical hurdles, and execution risks that could pressure margins.
If trade tensions escalate again or Apple fails to communicate a clear, long-term roadmap for its global supply chain, investor confidence could weaken, leading to a pullback in the stock—possibly below the USD 200 mark.
Traders and investors should remain cautious, keeping a close eye on geopolitical developments, policy announcements, and any updates from Apple regarding production shifts.
Volatility is likely to persist as the company balances growth ambitions with complex global risks.
The People’s Bank of China (PBOC), the country’s central bank, is charged with determining the daily midpoint of the yuan, also known as the renminbi (RMB). The PBOC employs a managed floating exchange rate system that allows the yuan’s value to move within a predefined “band” surrounding a central reference rate, or “midpoint.” This band is currently set at +/- 2%.
Today’s yuan midpoint is the strongest since 7 April and is the first setting below 7.2 since that date. The previous close was at 7.2075.
Central Bank Liquidity Action
The PBOC injected 180 billion yuan using 7-day reverse repurchase agreements at an interest rate of 1.40%. On the same day, 405 billion yuan matured, resulting in a net liquidity withdrawal of 225 billion yuan.
What the existing content lays out is a clear signal about how the central bank is balancing its short-term liquidity tools with its longer-term goals on currency control. The midpoint setting—lower than 7.2 for the first time in over a month—suggests a slightly more confident stance towards stabilising or even strengthening the currency. When we observe such a move, it typically hints that policy officials are less concerned about depreciation pressures, or that they are willing to let the renminbi show a bit more resilience—at least temporarily.
At the same time, the liquidity operation tells a slightly different story. Injecting 180 billion yuan through 7-day repos at 1.40% would normally be read as a supportive move—and would usually indicate that the authorities are keen to manage short-term liquidity expectations tightly. However, with 405 billion yuan maturing on the same day, the net liquidity effect is actually negative by 225 billion yuan. That represents a deliberate tightening. Liquidity has not been drained by accident. It reflects a deliberate desire to cool excess cash in the short-term funding system, most likely to lean against speculative flows or simply to keep interbank rates from falling too far.
For us, that matters. What’s being communicated—without being said explicitly—is that price stability remains a priority, and that any attempts to gauge policy easing from the currency fix alone should be tempered. When you take both moves together—the slightly firmer currency stance and the liquidity reduction—they form an unusually clear policy signal. Not aggressive tightening. Certainly not aggressive easing. It’s more akin to gently tapping the brakes when the car is approaching a downward slope.
Implications For Hedging Decisions
From where we sit, this compels a more fine-tuned approach to option positioning and near-term hedging decisions. Pairs involving the yuan should see a flatter implied volatility curve, particularly in the front-end. There’s not enough of a shift here to justify aggressive long-vol positions, especially not in the 1-week or 2-week tenors. Any pricing that still reflects heightened expectations of currency drift should be treated with due scepticism.
When short-end liquidity is moving in this way—swapping maturity windows for a withdrawal—it informs us that carry trades priced with low overnight costs could suddenly run into headwinds. Traders banking on seamless roll-overs may want to reduce leverage. We aren’t in a disorderly environment, but we are in one that could foster unexpected liquidity premiums across even relatively stable naming conventions.
The central bank isn’t shouting; it’s tweaking. Nobody is signalling a major reversal. But if we think in these terms—subtle reinforcement rather than blunt messaging—it becomes easier to see where short-term pricing could compress. There’s room to extract edge, but only by staying light. Not being overcommitted is particularly important when policy shifts are happening through technicals rather than grand pronouncements.
There is also a wider implication on longer-term vol structures that often gets overlooked. If policymakers are this willing to let the midpoint flex without letting overnight liquidity go unchecked, then we might soon start to see calendar spreads adjust modestly—especially in pairs where policy divergence is less stark. These aren’t huge trades, but they are there, and the market isn’t necessarily priced for them.
For those of us watching volatility curves, we may want to adjust our assumptions on gamma spikes around fixings or known liquidity windows. The non-obvious takeaway here is that calmer midpoint fixings do not imply looser money. They can, in fact, suggest the opposite. Liquidity is still the driver. And in this case, it has quietly moved in a direction that trims risk appetite without undermining policy credibility. That’s the pattern worth watching.
The GBP/USD pair climbed to around 1.3195 during the early European session, supported by developments in the US-UK trade agreement. President Trump announced a new 10% tariff on most British goods but agreed to reduce tariffs on British cars, steel, and aluminium.
However, GBP/USD fell by over one percent on Monday, dropping below 1.3200, due to a recovery in US Dollar demand. The recent trade talks between the US and China, resulting in a temporary suspension of high tariffs for 90 days, allowed market participants some time to assess the impact before further tariff impositions.
Uk Employment Data
UK employment data released on Tuesday showed a rise in the Claimant Count Change to 22.3K. The ILO Unemployment Rate also increased to 4.5% for the three months ending in March, with Average Hourly Earnings slightly declining.
Anticipation builds for the US Consumer Price Index (CPI) release, with expectations of a 2.4% annual rise in inflation for April. The core CPI inflation is projected to remain stable at 2.8% year-over-year. The outcome of both the UK employment report and US CPI data will be influential for the GBP/USD trajectory.
As the pound initially nudged higher, moving towards 1.3195 in early European trade, markets were reacting to a flicker of optimism surrounding transatlantic negotiations. A shift in the tariff stance from Washington helped buoy sentiment, with cuts in customs duties on British automotive and metal exports offering some relief. The 10% duty announced on other UK goods, however, quickly tempered that optimism, leaving sterling vulnerable to any shifts in market mood.
This fragility became clearer as sterling slipped back beneath the 1.3200 mark, giving up more than one percent. Behind this pullback was not just the stated trade news, but also a broader recovery in dollar appetite. Some of that renewed interest appeared to follow the temporary trade truce between the US and China. A 90-day window without further tariff escalation gave investors breathing room, allowing the greenback to attract flows again as a relative safe harbour.
Domestic Economic Concerns
From the domestic side, economic data released out of Britain painted a sketch that left little comfort. The rise in the Claimant Count Change to 22,300 suggests the job market is softening more than expected. Unemployment reaching 4.5%, from an earlier 4.2%, extended that picture. What likely caught attention more quietly was the small fall in wage growth. Average Hourly Earnings, though still positive, have begun to level off. This mix of higher jobless figures and slower pay raises hints at falling momentum in demand, which can have a dampening effect on rate expectations.
With these elements in mind, the focus began shifting to the upcoming US inflation print. Expectations for headline CPI to come in at 2.4% year-on-year could reinforce the dollar’s footing if met or exceeded. Core inflation, projected to hold at 2.8%, will also weigh heavily on how aggressive policy tightening may remain. Anything pointing to firmer underlying price pressures would support a stronger dollar bias.
In preparing for what lies ahead, we look towards US inflation as a pivotal marker. Markets responding to CPI data tend to move sharply if numbers surprise in either direction. Pair that with already waning UK labour data, and the current tone grows more vulnerable. A firmer inflation read stateside could prompt traders to price a more material policy divergence between the Bank of England and the Fed.
Traders may be more selective in options exposure, with implied volatility likely to widen around the economic releases. There may be reduced interest in longer-dated GBP calls if wage pressures continue to slide. Meanwhile, near-term strategies may reflect expectations of continued downward pressure, especially against the greenback if data aligns in its favour. Close attention must also be paid to positioning data and futures rollover patterns in case of skewed sentiment developing beneath current pricing.
As ever, staying data-dependent remains the clearest course here. Moves in interest rate expectations on either side of the Atlantic continue to drive the bulk of direction. With inflation data next in focus and employment slipping slightly in the UK, risk-reward is clearly leaning towards currency movement being dictated more by US outcomes than UK resilience for now.
Japan’s Finance Minister Kato is preparing to attend the G7 meetings in Banff. He expresses interest in discussing foreign exchange matters with U.S. Treasury Secretary Bessent, should an opportunity arise.
Kato mentions the possibility of discussing a tariff agreement if a meeting with Bessent occurs. While he refrains from commenting on foreign exchange levels, he intends to closely observe market developments influenced by the U.S.-China tariff agreement.
Yen’s Recent Weakening
The yen has weakened since the weekend due to the recent U.S.-China tariff adjustments. The developments have led to discussions and potential strategies involving global financial leaders.
What we see here is a set of carefully chosen remarks from Kato ahead of the G7 gatherings, grounded in both diplomacy and economic caution. His readiness to raise foreign exchange topics, should the setting allow, signals ongoing concern in Tokyo over the yen’s recent decline. While Kato avoids commenting on the currency’s numerical levels—perhaps out of convention or an effort to not unsettle markets—the message between the lines is straightforward: the yen’s slide hasn’t gone unnoticed.
Bessent’s position in recent policy decisions has clearly been influential. The impact of changes to trade measures between the U.S. and China has not only nudged the yen downward but rekindled global conversations about how tariffs shape capital movement. As we monitor these shifts, we must remember that exchange rates will continue to be driven by macroeconomic narratives just as much as by central bank signals.
Changes Ahead
In these next few weeks, it will be essential to remain attentive to comments emerging from these meetings—not because they will necessarily lead to immediate changes in position, but because they may hint at upcoming strategies or discomfort with status quo values. When finance ministers like Kato speak publicly at such gatherings, carefully weighing each phrase, they often do so against a backdrop of coordinated conversations out of public view.
The fall in the yen, tied as it is to recent announcements from Washington and Beijing, may attract further comment indirectly at the G7 summit. Notably, the absence of direct intervention language does not mean there isn’t concern. Instead, it suggests a wait-and-see approach being applied until the broader consequences of trade adjustments become clearer.
For those interpreting derivatives pricing, we don’t take these exchanges at face value—we follow what the participants are choosing not to say. The timing of remarks, the emphasis on observing patterns rather than acting directly, points to an intent to prepare for action rather than initiate it.
Volatility in currency-related instruments could remain elevated as we head through and beyond these sessions. The more firmly tariff positions are defined by the large players, the steadier the downstream effects will become. But that clarity may be weeks away, depending upon how talks progress behind closed doors.
For now, it would be useful to keep one eye on possible joint statements or informal briefings afterwards. If there’s renewed alignment on currency concerns or hints toward rebalancing trade measures, we may see some knock-on effects filtering through forward curves.
Gold prices in Saudi Arabia increased to 392.16 Saudi Riyals (SAR) per gram from SAR 390.27 the previous day. A tola of Gold reached SAR 4,574.06 compared to SAR 4,551.97 earlier.
Prices are adapted from international values using the USD/SAR exchange rate and are updated daily. These figures are for information purposes and actual market prices may vary.
The Role Of Gold In The Economy
Gold has been historically used as a value store and hedge against inflation. It is considered a safe-haven asset, often sought during uncertain times.
Central banks are the primary holders, buying 1,136 tonnes worth about $70 billion in 2022. Countries like China, India, and Turkey have increased their reserves.
Gold often inversely interacts with the US Dollar and US Treasuries. When the Dollar is weak, Gold value typically increases as a diversification tool in volatile markets.
Price shifts result from geopolitical instabilities and economic concerns, due to Gold’s safe status. Lower interest rates benefit Gold, while higher rates suppress value. The US Dollar’s performance strongly impacts Gold pricing.
In essence, the article lays the groundwork for understanding how Gold operates as both a protective measure against economic shocks and as a pricing mechanism tied closely to broader financial cues. Over the past day, the price climbed slightly within Saudi Arabia, which is mostly a reflection of the global spot movement combined with shifts in exchange rate values between the US Dollar and the Saudi Riyal.
Prices presented in the article suggest a direct pass-through from global markets into local valuations, adjusted using foreign exchange data. Since these benchmarks do not account for specific transactional costs or variances at the retail level, they serve as a fairly clean indicator rather than a tradeable quote.
We know from past patterns that Gold continues to gain appeal during periods of geopolitical tension and declining yields. With recent buying surges from central banks—including those in Asia and parts of Europe—there is increased pressure on supply, which stabilises its upward trend. Yields and Dollar strength, meanwhile, remain the two most active levers pulling in one direction or another.
Impact Of Economic Indicators On Gold
For those of us watching derivative markets, whether through futures or options, attention must turn toward key rate expectations and monetary policy shifts in the US. If Federal Reserve signals hint at a hold or even a reduction in rates, Gold’s value proposition strengthens. This means implied volatility in Gold contracts could spike, particularly in expiries aligned with central bank meetings. We should not underestimate the type of price reaction sparked by soft CPI figures or dovish tones from Powell.
What matters now is the relationship between real yields and short-term speculative behaviour. When real yields—those adjusted for inflation—dip, the opportunity cost of holding metals like Gold drops. That encourages both long-term holders and fast-money trades to bump exposure. If real yields show signs of peaking or reversing, some softness may follow in the underlying, but this would likely be seen first in declining futures volume or narrowing spreads between front and back months.
From a pure trading standpoint, the skew in options markets may start leaning toward calls if traders anticipate USD softness due to external pressures, such as weak labour data or fiscal concerns. In this context, holding delta-neutral or moderately bullish strategies could offer tighter risk outcomes. Conversely, if Eurozone macro data deteriorates sharply, USD could rise on flight-to-safety flows, temporarily dampening Gold enthusiasm.
We need to work with the idea that Gold isn’t isolated. It’s not just about looking at its chart in a vacuum. It reacts. To credit conditions. To bond auctions. To PMI readings. Understanding where futures open interest is building or decaying tells a subtler story than spot prices alone can offer.
The tone in Treasuries deserves monitoring, too. If the US 10-year yield slips below 4% and sustains, that acts as a green light for assets without a yield—like Gold—to attract new inflows. It’s these window periods, between Fed guidance and market recalibration, where opportunities widen the most. Timing is sensitive. Holding through headline shifts calls for tighter stops but broader scenarios.
We should watch for any uptick in implied correlation with broader commodities. When oil and metals trade in synchrony, it’s often because global risk appetite has turned. These moments can create exaggerated swings in option premiums and futures basis, which in turn become trading signals tied more to sentiment than fundamentals.
As positioning adjusts and liquidity varies across time zones, it’s the breadth of participation—from institutional to high-frequency—that gives away the next move. Keep alert. Tap flow data. Track margin levels. Most of all, stay adaptive.
The People’s Bank of China (PBOC) sets the daily midpoint of the yuan, or renminbi (RMB), under a managed floating exchange rate system. This system allows the yuan’s value to fluctuate within a certain range, or “band,” around a central reference rate.
The current trading band is set at +/- 2%. Each morning, the PBOC determines a midpoint for the yuan against a basket of currencies, mainly the US dollar. It considers market supply and demand, economic indicators, and currency market fluctuations to set this midpoint.
Yuan Exchange Rate Management
The PBOC allows the yuan to move within the specified range around the midpoint, which is currently +/- 2%. This permits the yuan to appreciate or depreciate by up to 2% from the midpoint on any given day. The PBOC can adjust this range based on economic conditions and policy goals.
If the yuan’s value nears the band’s limit or shows significant volatility, the PBOC may intervene by buying or selling the yuan to stabilise its value. This intervention ensures a controlled and gradual adjustment of the yuan’s value, maintaining market stability.
The current framework, while designed to inject a measure of flexibility into yuan pricing, still reflects a tightly managed approach. This policy, rooted in the daily setting of a central rate by the PBOC, effectively dictates the direction of onshore exchange rate expectations. The 2% band provides some breathing room, but ultimately, currency traders are responding not only to market signals but also to inferred guidance from the monetary authorities.
By establishing the midpoint each morning, the PBOC is signalling its stance on external and domestic pressures—particularly shifts in dollar strength, local credit data, export performance, and sentiment from regional central banks. As this midpoint consistently deviates from offshore pricing, it reveals how the central authority is engineering the price to either curb volatility or guide capital flows more assertively.
Balancing Export Competitiveness
With this in mind, we’re seeing that recent adjustments in the daily fix are positioned to balance export competitiveness against the persistent drag from capital outflow concerns. This matters immediately, because wide intraday moves near the upper or lower bounds often precede well-timed intervention, which can include liquidity operations or open market sales of foreign reserves.
Examining Chen’s comments from earlier this week, there’s a pattern of reinforcing stability while tolerating gradual repricing rather than fixed directional bias. What emerges is a preference to manage expectations rather than completely resist pressure from offshore markets. Liu, on the other hand, pointed out that more consistent selling of dollars at key levels illustrates the preference to smooth disorderly moves rather than reverse them altogether.
From our point of view, these signals suggest that any abrupt movements well outside of this band—either due to external rate surprises or internal policy shifts—will be absorbed gradually, not ignored. This creates opportunities, but also tightens timing for those positioned on shorter durations.
Therefore, attention should shift towards any slight deviations in the official fix, especially where they diverge from prior market closes. Also, volumes during thinner overnight sessions have coincided with stronger central bank footprint, particularly in the forward markets and swap arrangements—elements often overlooked but now offering clearer clues.
Be mindful: interventions will be more reactive when sentiment overshoots fundamentals. Price action that diverges sharply from the fix, especially in the latter half of the local session, tends to hint at forthcoming responses.
Lastly, although Kuang did not overtly specify new measures, the difference between stated policy language and the subsequent silent adjustments in the forward points cannot be dismissed. We’ve noticed this divergence widens briefly ahead of any adjustments to the official band—suggesting that signals are being planted softly ahead of hard policy moves.
These aren’t just quirks of central bank behaviour—they’re data points that help define tomorrow’s price structure. When observed carefully, they narrow the range of outcomes, making positioning more effective rather than speculative.
Gold prices in the United Arab Emirates increased on Tuesday, with the price for gold reaching 384.05 AED per gram, compared to 382.18 AED on Monday. The price for gold per tola rose to 4,478.91 AED from 4,457.67 AED, indicating a rise in valuation.
US Treasury bond yields continue to climb, with the 10-year Treasury note yield increasing by seven basis points to 4.453%. Economist projections expect the US Consumer Price Index for April to stay steady at 2.4% year-on-year.
Central Banks And Gold Reserves
Central banks continue to add gold to their reserves, with the PBoC increasing its holdings by 2 tonnes in April. Poland’s national bank saw an increase of 12 tonnes, and the Czech National Bank added 2.5 tonnes.
The swap market anticipates the Federal Reserve’s first rate cut of 25 basis points in July, with another cut expected later in the year. Gold prices in the UAE are calculated by adapting international prices to local currency and measurement units, with rates updated daily based on market conditions.
The gain in gold prices observed at the beginning of the week—an advance of nearly 2 dirhams per gram—suggests growing investor interest and protective repositioning. This uptick, though not dramatic, reflects broader global undercurrents. What props up the price isn’t local buying alone but also underlying demand from sovereign monetary institutions and softening expectations surrounding US rate policy.
In the US, upward movement in Treasury yields—particularly the 10-year, ticking up to 4.453%—points to investor caution. Markets aren’t yet convinced that inflation has been completely tamed. While headline CPI is estimated to come in unchanged at 2.4% year-on-year, there’s little indication of a firm downtrend that could prompt the central bank to accelerate easing. As yields rise, the opportunity cost of holding non-yielding assets like gold also increases—but that’s only one piece of the equation.
Strategic Accumulation And Market Reactions
What makes the situation stand apart today is central bank activity. Strategic accumulation continues, notably driven by Asian and Eastern European participants. The People’s Bank of China added 2 tonnes, Poland bought twelve, and the Czech Republic increased reserves modestly at 2.5 tonnes. When central banks lift their holdings, they’re not speculators—they are making a long-term macro call on currency stability, inflation resilience and geopolitical buffering.
So in terms of what drives the price: it’s expectations about future rates, of course, but also physical buying in the background. We can’t ignore the importance of these strategic purchases, particularly because they are not directly sensitive to short-term market noise. This sets a lower boundary for where spot prices may fall, lending a measure of stability even when trader sentiment becomes jittery.
Swap markets are currently pricing a 25 basis point cut from the US central bank in July, with at least one more presumed by year-end. That’s bullish for gold on paper, yet markets have been known to get ahead of themselves. If May’s inflation data does not confirm a plateau or sustains above 2.4%, yield curves and swaps may need to reprice quickly. And that—not high prices or surplus inventory—would shake the entire forward curve.
What deserves close monitoring from now until mid-summer is the relationship between inflation expectations (especially in the five-year breakevens) and the short end of the swap curve. If those start to diverge—say inflation expectations creep up while swap pricing still assumes easing—dislocations could arise in the options market that don’t resolve neatly. These are precisely the moments from which volatility pockets emerge. We’d do well to keep tabs on realised volatility and the skew in gold options, particularly across expiries between July and September.
Physical demand helps form a loose floor, but it’s speculative flows that decide the direction—it’s the channel between these two that gives derivative traders their edge. Parsing out that flow is less about reacting to price moves and more about recognising when the logic backing those moves weakens.
With rate expectations baked in at somewhat stretched valuations, and central banks steadily reinforcing demand under current thresholds, the space for mean reversions remains open—but compressed. Traders expecting directional breakouts must be prepared for unexpected retracements, and those playing volatility should consider how long implied vol can stay misaligned from realised shifts, especially with macro data drivers on the horizon.
We’re watching for sudden changes in positioning: open interest in gold futures, front-month option gamma, and inflows to metal-backed ETFs could offer short-term clues. But the core dynamic remains shaped by macro policy expectations and long-term institutional buying. Relative mispricings between futures and spot—or mismatches in short-term funding costs—could introduce transient dislocations, and these are opportunities when framed correctly.
So the task ahead is not about chasing recent price moves, but about staying alert to shifting assumptions that underpinned them. Rates, inflation data, sovereign demand—they’re all in flux. But it’s the transition points that matter most.
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