Gold extended modestly lower, exceeding yesterday’s low at 1265.12 as risk assets continue to benefit from the French election results and the prospect of much lower U.S. corporate taxes. The weaker dollar and geopolitical risks continue to offer some support.
The Trump administration’s pitch for a 15% corporate tax rate has stock market investors all excited, but it strikes me as unlikely such a low rate will actually get through Congress. This could be typical Trump negotiating tactics; ask for the moon and negotiate to some compromise.
Nonetheless, stocks are charging higher and the dollar index has fallen to levels not seen since November. According to Reuters, ECB sources are suggesting there could be a hawkish signal in June.
The next ECB policy announcement is actually tomorrow, but they are widely expected to hold steady. Even so, there could be some sense of relief communicated that might be a harbinger of a more hawkish tone in June.
In Japan however, BoJ Governor Kuroda sees QE continuing for some time. Kuroda said a stronger yen could delay attainment of their 2% inflation goal, so of course that’s the last thing the BoJ wants.