Strong Dollar Streak Hits One-Year High on Delayed Fed Cuts

The U.S. dollar is experiencing its strongest rally in over a year, propelled by expectations that the Federal Reserve will maintain high interest rates longer than anticipated and by increasing demand for the dollar as a safe haven due to rising tensions in the Middle East. The Bloomberg Dollar Spot Index has risen for five consecutive days, marking a nearly 2% increase—its most significant since February 2023. This surge is further intensified by China's decision to lower the yuan's reference rate, which has put additional pressure on emerging market currencies. Adjustments in market expectations now suggest that the Fed might delay easing interest rates until September, a shift from the previously expected July, following a series of unexpectedly high U.S. inflation reports that have heightened market volatility.

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UBS Warns of Potential 6.5% Fed Rate Hike Amid Enduring Inflation

UBS Group AG strategists suggest there is a growing risk that the Federal Reserve may increase interest rates to as high as 6.5% next year, due to persistent strong U.S. economic growth and sticky inflation. Initially predicting two rate cuts this year, UBS now considers a scenario where inflation does not meet the Fed's target, potentially leading to resumed rate hikes. This shift could trigger a significant selloff in both the bond and stock markets. Recent U.S. data indicating economic resilience has led markets to adjust expectations, reducing bets on policy easing and preparing for the possibility of increased rates if inflation remains above 2.5%.

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Consumer Spending Defies Inflation Fears, Jumps 0.7% in March

In March, U.S. retail sales rose by 0.7%, surpassing expectations of a 0.3% increase despite concurrent rising inflation, according to the Commerce Department. This growth, although slower than February's revised 0.9% rise, indicates that consumer spending remained robust. The consumer price index, as reported by the Labor Department, climbed 0.4% for the month, aligning with an annual inflation rate of 3.5%. However, the 4% annual increase in retail sales demonstrates that consumer spending outpaced inflation, suggesting a resilient economic demand amidst escalating prices.

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Safe-Haven Demand Drives Gold Closer to Peak Amid Middle East Unrest

As tensions escalate in the Middle East following Iran's extensive drone and missile attacks on Israel, gold prices are approaching new record highs due to increased safe-haven demand. On Monday, gold prices rose by 1.7%, nearing last week’s record of over $2,400 per ounce, though the price later settled lower as investors adjusted their positions amidst overheated rally indicators. The ongoing geopolitical uncertainties in the Middle East and Ukraine further enhance gold's appeal as a safe investment during times of crisis. Chris Weston of Pepperstone Group emphasizes that the geopolitical tensions alone are a compelling reason to invest in gold, anticipating a continued upward trajectory in its price.

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Cosmic Flash Leaves Scientists Puzzled Over Origin of Gold and Platinum

In October 2022, astronomers using the Gemini South telescope in Chile observed the brightest cosmic flash ever recorded, dubbed the "Brightest Of All Time" or the BOAT. Further analysis by the Webb Space Telescope identified the BOAT as a supernova, a massive star's explosive demise. This research, published in Nature Astronomy, sought to find traces of heavy elements like gold and platinum typically thought to be produced by such cosmic events. However, none were detected, deepening the mystery of how these precious metals originate. The study suggests that while some heavy elements come from neutron star mergers, this process alone cannot account for their abundance in the universe, as these mergers are infrequent and occur over vast time scales.

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