Global bond yields have edged higher as immediate risk appetite has stabilised with some evidence that reduced concerns surrounding the French Presidential election has also curbed gold demand.
Gold prices were confined to narrow ranges during US trading on Wednesday with current markets confined to narrow ranges. The sharp dip in oil prices created some gold support as underlying risk appetite deteriorated, although US Treasuries failed to gain significant backing which also tended to limit gold demand with support just below $1,280.
The Fed’s Beige Book reported modest to moderate growth in the latest survey and there were only modest increases in prices despite a further tightening of labour markets and upward pressure on wages.
Currency trends were mixed in the European session on Thursday as the US currency lost ground against the European currencies, but was resilient against the yen with USD/JPY moving above the 109.00 level.
Overall risk conditions were more benign as equity markets rallied slightly and there was evidence that concerns surrounding the French Presidential election was ebbing slightly even though there has been no major shift in opinion polls.
Defensive demand for German bunds eased slightly during the European session and equity markets also made some net gains.
US jobless claims were slightly higher than consensus forecasts at 244,000 from 234,000 previously, although this still indicated a robust labour market. The Philadelphia Fed index declined to 22.0 for April from 32.8 previously and compared with market expectations of a figure around 26.0.
There was little currency-market reaction to the data, although bonds lost further ground in early New York trading with US 10-year yields at close to 2.25%.
Higher yields pushed USD/JPY to 109.30 and, in response, gold dipped to test support below $1,280.
Trends in fixed income will continue to be monitored closely in the very short term with dollar moves and developments in risk appetite also important. Any reduction in concerns surrounding the French Presidential election would tend to curb gold support with the potential for choppy trading on Friday.