Palladium prices fell on Friday as the dollar muscled up against most major rivals, and amid concerns about global developments.

The G7 countries announced the liquidation of some seized Russian money and assets to use in support of Ukraine. 

In response, Russian President Vladimir Putin said such a step is larceny. 

Russia is one of the world’s major palladium producers and exporters, and with the outbreak of the Ukrainian war, the metal’s prices hit record highs back then.

As for the dollar, the index rose 0.5% as of 15:52 GMT against a basket of major rivals to 105.7, with a session-high at 105.8, and a low at 105.1. 

The Federal Reserve announced a decision to maintain interest rates unchanged between 5.25% and 5.5% at the June 11-12 meeting, maintaining them at 23-year highs. 

The Fed’s policy statement explains that the Federal Open Market Committee considers the risks facing achieving better employment and inflation goals are moving towards a better balance, but the economic outlook remains uncertain. 

More crucially, the Fed expects a single interest rate cut this year instead of three cuts mentioned at the March meeting statement. 

Federal Reserve Chair Jerome Powell said the US economy achieved some progress in bringing inflation towards the 2% target and increasing job opportunities. 

On trading, palladium futures due in June fell 2.6% as of 15:53 GMT to $876.6. 

Gold prices rose 1.25% in European trade on Friday on track for the first weekly profit in a month, as US 10-year treasury yields lost ground following latest inflation data.

The data boosted the odds of two US interest rate cuts this year as investors now await more clues about the future. 

Prices

Gold prices rose 1.25% today to $2332 an ounce, with a session-low at $2301. 

Prices lost 0.9% yesterday, the first loss in four days under pressure from the dollar.

Weekly Trades 

Gold prices are up 1.7% so far this week, on track for the first weekly profit in a month.

US Yields

US 10-year treasury yields fell 1% today to 10-week lows at 4.202%, underpinning non-yielding assets.

US Consumer Prices 

Official data today showed US consumer prices rose 3.3% y/y in May, down from 3.4% in April, while core inflation rose 3.4%, slowing down from 3.6%. 

On a monthly basis, consumer prices were flat in May, while core prices rose 0.2%, below estimates of 0.3%. 

US Rates

According to the Fedwatch tool, the odds of a Fed 0.25% interest rate cut in September rose to 70%, and the odds of such a cut in November rose to 90%. 

The Fed 

The Federal Reserve announced a decision to maintain interest rates unchanged between 5.25% and 5.5% at the June 11-12 meeting, maintaining them at 23-year highs. 

The Fed’s policy statement explains that the Federal Open Market Committee considers the risks facing achieving better employment and inflation goals are moving towards a better balance, but the economic outlook remains uncertain. 

More crucially, the Fed expects a single interest rate cut this year instead of three cuts mentioned at the March meeting statement. 

Economic Outlook

The Fed’s quarterly forecasts report included several revisions: 

Growth: The Fed maintained US growth outlook at 2.1% for 2024, and 1.8% for 2025, and 2.0% for 2026. 

Inflation: The Fed raised its inflation outlook this year to 2.6% from 2.4%, and to 2.3% in 2025. 

Core Inflation: The Fed raised its outlook for core inflation in 2024 to 2.8%, and raised it to 2.3% in 2025. 

Interest Rates

The Fed now expects interest rates at between 4.75% and 5.25% this year, indicating a single interest rate cut this year. 

Powell 

Federal Reserve Chair Jerome Powell said the US economy achieved some progress in bringing inflation towards the 2% target and increasing job opportunities. 

Powell said the labor market has achieved a better balance with strong employment gains, while inflation fell from 7% to 2.7% but remains too high.

He asserted the Fed’s commitment to bring inflation to the 2% target to support a strong economy that brings benefits to everyone. 

According to Fed Chair Powell, the latest inflation data didn’t give policymakers enough confidence that they’re approaching their targets yet. 

The SDPR

Gold holdings at the SPDR Gold Trust fell 1.44 tonnes yesterday to a total of 829.34 tonnes, the lowest since April 17. 

Euro fell in European trade on Friday against a basket of major rivals, sharpening losses for the second day against the dollar and giving up $1.07, marking six-week lows and on track for the largest weekly loss since April amid mounting EU political risks. 

Anti-EU parties won a quarter of seats at the European Parliament in the last elections, up from a fifth in 2019.

And after the governing French party lost the vote to the far right in European elections, French President Emanuel Macron dissolved the local parliament and called for an early election. 

As the euro continues to face downward risks due to mounting political tensions, analysts expect more losses for the common currency.

The Price 

The EUR/USD fell 0.5% today to $1.0680, the lowest since May 2, with a session-high at $1.0745.

The pair lost 0.7% on Thursday, resuming losses after a short hiatus.

Weekly Trades

The EUR/USD pair is down 1.1% so far this week, on track for the second weekly loss in a row, and the largest since early April. 

EU Parliament Elections

After election results were revealed, the far right groups controlled nearly a quarter of the Brussel-based Parliament, up from a fifth in 2019. 

Some analysts noted that even as centrist groups managed to maintain their majority, the new European Parliament is now the most right-wing it has been since its establishment. 

Early French Elections 

French President Emanuel Macron dissolved the parliament and called for early legislative elections after the results of the EU Parliament elections.

The governing French party lost the EU elections to the far right, forcing Macron to gamble with the new local elections to try and reassert authority. 

Analysts note that the odds of a surprise win by the far right in French elections will keep the euro under pressure in the short term.

Grim Outlook for Euro

Singapore Bank’s analysts pointed to French political risks as the main reason behind euro’s performance as the worst performing major currency this week.

They expect the EUR/USD pair to fall once more below $1.07 in the near term. 

Yen tumbled in Asian trade on Friday to six-week lows against the US dollar, sharpening its losses for the second day following the Bank of Japan’s policy meeting. 

As expected, the BOJ maintained interest rates unchanged for the second meeting in a row, and as a challenge to market expectations, the BOJ asserted it’ll continue to purchase government bonds at the current pace, and will put a plan to reduce the purchases later at the July meeting.

The Price 

The JPY/USD pair rose 0.6% today to 157.98, the highest since May 1, with a session-low at 156.79. 

The yen lost 0.2% against the dollar on Thursday, the fourth loss in five days, after the Fed vowed to maintain interest rates high for most of the year.

The BOJ 

As expected, the Bank of Japan voted to maintain interest rates at 0.1% and monetary policies unchanged.

The BOJ decided in March to raise short-term interest rates by 20 basis points to 0.10%, the first such rate hike since 2007. 

In its update for the policy statement, the BOJ unexpectedly maintained the current plan purchasing government bonds at a pace of 6 trillion yen ($38 billion) a month. 

The markets heavily expected the BOJ to announce a cut to its massive bonds purchases program this month.

However, the BOJ did say it’ll put up such a plan to reduce purchases at the July meeting. 

The BOJ also removed any indications that it’ll continue to raise short-term interest rates to levels that don’t stun or overheat the market. 

Nearly two thirds of the economists polled by Reuters expected the BOJ to start reducing its monthly bonds purchases this month. 

The BOJ has recently started to normalize its policies at a time when most other central banks have gone a long way in tightening monetary policies to combat inflation, and now have moved on to rate cuts.