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Fed Rate Hike Bets Could Cap Gold’s Upside

Markets are increasingly betting on a US rate hike this year after new Fed Chair Kevin Warsh delivered a hawkish message on inflation at his first policy meeting. That may act as a headwind for Gold. Although the metal is widely seen as an inflation hedge, its lack of yield tends to reduce its appeal when interest rates move higher.

CAD CPI Print

• Canada inflation rose 3.2% in May from 2.8% in April, with prices up 1.0% monthly.
• Core inflation reached 2.2%, showing underlying price pressures remain sticky and easing has stalled.

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Goldman Sachs Forecast for U.S

Goldman Sachs cuts 12-month recession risk estimate in the #US to 15% (prev. 25%)

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GBP Supported by BOE, Capped by UK Political Risk

• UK political risk is back in focus, with speculation around a possible Labour leadership change in mid-July adding fresh uncertainty for GBP traders.
• From a market perspective, any leadership transition risk could keep sterling sentiment cautious, especially if investors start pricing in policy or fiscal uncertainty.
• On rates, the next BOE meeting on July 30 is widely expected to be a hold, with policymakers still leaning cautious rather than clearly dovish.
• Bailey’s message remains relatively hawkish, as inflation risks and energy uncertainty are still keeping the BOE from signaling an easy shift toward cuts.
• For traders, that means GBP may stay supported by steady rate expectations, but political headlines could limit upside and increase short-term volatility.
• Bottom line: BOE policy is still a GBP support factor, but UK political uncertainty is becoming an added risk for sterling positioning.

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ECB Holds Neutral, Hawkish Tone Supports Euro Outlook

• From a market perspective, the ECB still looks broadly neutral for now, with the policy rate at 2.25% and the July 23 meeting widely expected to deliver no change.
• Even so, the underlying tone across ECB policymakers still leans slightly hawkish, as more officials remain worried about inflation than about growth.
• That matters for traders because it suggests the ECB is not in a rush to ease and still sees inflation as the main policy risk.
• Lagarde’s message was that the ECB will stay data-driven and decide meeting by meeting, with no preset path for rates.
• She also signalled that the recent shock is meaningful, but not yet strong enough to create lasting inflation pressure or justify a stronger policy response right now.
• In simple terms, the ECB is comfortable staying patient for now, but it is not sounding dovish.
• Compared with the Fed and the BOE, the ECB appears to have more room to raise rates if inflation stays sticky.
• Market pricing also reflects that view, with around 47bp of tightening expected by the end of 2026 and roughly 55bp through 2027.
• That suggests traders still see rate hikes as possible in 2026, before around two cuts are priced in for 2027.
• Lagarde also warned that inflation could stay above 3% for the rest of the year, which helps explain why the ECB still sounds cautious on easing.
• At the same time, the eurozone economy is holding up better than feared, with stable employment, rising real incomes, and only a moderate shock so far.
• Her comment that the upper end of the neutral range is around 2.25% to 2.5% also matters, because it implies policy is near neutral, not deeply restrictive.
• For traders, the takeaway is that the ECB is on hold for now, but the broader tone still supports the euro more than a clearly dovish central bank would.

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