On February 4th, local time Tuesday (February 3rd), legendary investor and Bridgewater Associates founder Ray Dalio warned that against a backdrop of escalating geopolitical tensions and highly volatile capital markets, the world is on the brink of a "capital war." Speaking at the World Government Summit in Dubai on Tuesday, Dalio stated that the current situation is approaching a tipping point for capital warfare. A capital war refers to the "weaponization" of funds through trade embargoes, cutting off access to capital markets, or using debt ownership as a tool for pressure. "We are on the brink," Dalio said. "That means we haven't really entered a capital war yet, but we are very close, and crossing that boundary would be very easy because of the mutual fears on all sides."
Furthermore, Steven Major, a well-known bond analyst, former global head of fixed income research at HSBC Holdings, and now global macro advisor at broker Tradition Dubai, suggested that a Federal Reserve led by Kevin Warsh could implement interest rate cuts far exceeding current market expectations. After President Trump indicated last week his intention to nominate Warsh for Fed Chair, the market initially expressed some confusion over the potential impact of the appointment on interest rates. Warsh, a former Fed policymaker known for his inflation concerns, is being considered by Trump, who has been pushing for significant rate cuts. Major said in a Bloomberg Television interview on Tuesday: "I think a reasonably fair assumption is: if he weren't in the rate-cutting camp, he wouldn't be considered for the role. The market is currently pricing in about two rate cuts, but we could see four or five, not two."
Economic data to watch today includes the UK January SPGI Services PMI Final, the Eurozone January Harmonised CPI Annual Rate, the US January ADP Employment Change, and the US January ISM Non-Manufacturing PMI.
Gold / US Dollar Gold rebounded sharply yesterday, with the spot price currently trading around $5070. Besides bargain-hunting buying providing strong support, dovish comments from Federal Reserve officials reigniting expectations for rate cuts were also a key factor supporting gold's recovery from its decline. Additionally, concerns over another potential US government shutdown also provided some support for the precious metal. Today, watch the resistance near $5150, with support below near $5000.
Australian Dollar / US Dollar The Australian Dollar surged higher yesterday, with the spot price currently trading around 0.7030. In addition to short-covering providing some support, the Reserve Bank of Australia's expected 25-basis-point rate hike and its upward revisions to growth and inflation forecasts during the session were the main drivers behind the Aussie's rebound. Furthermore, the US Dollar Index weakening under pressure from renewed Fed rate cut expectations also contributed to the pair's movement. Today, focus on resistance near 0.7100, with support below near 0.6950.
US Dollar / Canadian Dollar The US Dollar/Canadian Dollar moved lower in a volatile session yesterday, closing slightly down on the daily chart, with the spot price currently trading around 1.3640. Aside from profit-taking exerting some downward pressure, the US Dollar Index softening under the weight of multiple negative factors was also a significant element pressuring the pair lower. Moreover, a rebound in crude oil prices, which closed higher, also contributed to the selling pressure. Today, monitor resistance near 1.3750, with support below near 1.3550.