Recently, the diminished probability of a Feds interest rate cut by the
end of this year and replacing it by a probability of tightening has
contained the current market sentiment pushing the gold lower as a found
tool to curb inflation was not priced in the market and has become in the
FEDs hand. In the same time the pace of monetary tightening in UK and EU
is expected to be continued this year.

The central banks hike the interest rate for curbing inflation and this
increase the currency yields and its attractiveness which can decrease the
liquidity and curb investment to cool the economy for fighting inflation
which can reduce the value of gold and its value as a hedge of inflation
can keep the value of the wealth.

It is important to wait the recent MPC meeting minutes this week as it can
show us the degree of inflation worries in UK and how far we are close to
another tightening. It is widely expected to be hawkish which can underpin
the pound this week till the release of the minutes.

In this same time and after last week US failure to announce china as a
currency manipulating country, the greenback could found further rooms to
appreciate versus the yen supported by the clear gradual pace of
tightening in Japan which curbs the yen appreciation making it the first
carry trade currency currently as its interest rate outlook looks
relatively weak currently comparing with its EU and US counterparts not
just the current .5%.

Best wishes

FX Consultant

http://www.fx-recommends.com