Market Outlook: Middle East Tensions and Fed Policy Outlook Keep Gold Steady
Gold remained near $2,330 per ounce on Wednesday, steady after a slight decline. Fed Chair Powell’s cautious remarks on a gradual US economic slowdown and the need for more data to confirm lower inflation influenced investor sentiment. US job openings for May exceeded expectations, showing a rebound but indicating ongoing labor market softness. Attention shifted to the FOMC meeting minutes and Friday’s nonfarm payrolls report for insights into Fed policy. Tensions in the Middle East, with Israeli actions in Gaza, also drew international concern.
The dollar index stabilized around 105.7 on Wednesday after recent declines, as investors assessed the Fed’s monetary policy amidst strong job market data and Powell’s comments. The JOLTS report showed a notable increase of 221,000 job openings in May, totaling 8.140 million, surpassing expectations of 7.91 million. Powell noted progress in managing inflation but stressed the need for further confidence before considering rate cuts. Focus shifted to the latest FOMC meeting minutes and upcoming nonfarm payrolls report for further clarity. The dollar remained near three-year highs against the yen.
The yen hovered around 161.6 per dollar, its lowest since 1986, raising concerns about potential government intervention. The yen’s weakness was driven by interest rate differentials between Japan and the US and speculation of a potential second term for Donald Trump, which could increase Treasury yields. The BoJ’s cautious approach to monetary policy normalization also pressured the yen, though speculation is growing about a possible rate hike at the BoJ’s late July meeting. The BoJ highlighted that a weak yen raises import costs, adding to inflationary pressures and reducing household consumption. Finance Minister Shunichi Suzuki reiterated the government’s vigilance on currency movements, noting that exchange rates are influenced by multiple factors.
EUR/USD Trades Steady: Resistance at 1.0750 and Beyond
Ahead of news flows from the United States, the EUR/USD pair traded flat for the week. The first resistance level stands at 1.0750, with subsequent levels to watch at 1.0780 and 1.0810 if this level is surpassed. On the downside, the first support level is at 1.0730, followed by additional supports at 1.0700 and 1.0670 if the price falls below this level.
Gold Trading Sideways: Resistance at 2338 and Above
Gold continues to trade within a horizontal range. The first resistance is at 2338, with subsequent levels to watch at 2358 and 2375 if this level is breached. On the downside, the first support level is at 2320, followed by further supports at 2300 and 2280 if the price falls below this level.
Gold Gains Ground on Slower US Job Growth and Services Contraction
Gold surged to approximately $2,360 per ounce on Thursday, nearing its highest levels in four weeks following new US economic data that strengthened expectations of Federal Reserve interest rate cuts. In June, US services activity unexpectedly contracted sharply, marking its steepest decline in four years and suggesting decreased inflationary pressures. Furthermore, continuing jobless claims extended their nine-week increase streak, while private payrolls in June expanded at a slower pace. Federal Reserve officials acknowledged a slowing US economy during their June meeting but advocated for a cautious approach to rate cuts, according to the latest FOMC minutes. Additionally, heightened tensions in the Middle East, sparked by reports of Israel’s targeting of a senior Hezbollah commander and subsequent retaliatory actions by Hezbollah near the border, spurred safe-haven demand for the precious metal.
On Thursday, the dollar index stabilized around 105.3 after reaching a three-week low in the previous session, pressured by lackluster US economic data that heightened expectations for Federal Reserve interest rate cuts this year. Data released Wednesday revealed an unexpected contraction in US services activity for June, coupled with weaker private employment growth, signaling a decelerating economy. Meanwhile, minutes from the Fed’s June policy meeting indicated a divergence among members regarding the duration of maintaining the terminal rate, while emphasizing a cautious stance on rate cuts. Investors are now focused on Friday’s nonfarm payrolls report for further insights into the labor market. Currently, markets are pricing in approximately a 68% probability of a Fed rate cut in September, a notable increase from around 56% just a week ago. The dollar softened broadly but remained near 38-year highs against the yen.
GBP/USD, which closed yesterday with a rally, has its first support at 1.2735. Below this level, subsequent supports are at 1.2680 and 1.2620 respectively. On the upside, the first resistance is at 1.2780, with further resistances at 1.2800 and 1.2860 if this level is exceeded.
Gold Tests Resistance at 2364, with Eyes on 2375 and 2395
For gold, the initial resistance is at 2364, with subsequent levels at 2375 and 2395 above that. On the downside, the first support is at 2343, followed by 2332 and 2320 respectively.
Yen Strengthens Against Dollar with Fed Rate Cut Speculation
The Japanese yen strengthened beyond 161 per dollar, recovering slightly from its lowest point in 38 years. This gain was primarily due to a weakening US dollar, as disappointing US economic data reinforced expectations that the Fed might begin reducing interest rates as early as September. Concerns about potential government intervention also supported the yen, as Japanese authorities had spent nearly 10 trillion yen from late April to late May to stabilize the currency after it fell below the 160 per dollar mark. However, the yen remained under pressure due to significant interest rate differentials between Japan and other major economies, prompting investors to borrow yen and invest in higher-yielding currencies. Additionally, the Bank of Japan’s cautious approach to adjusting monetary policy added to the yen’s challenges, despite growing speculation that the BoJ might raise rates at its upcoming policy meeting in late July. Furthermore, the BoJ had announced plans to outline the phasing out of its bond purchasing program later this month.
On Friday, the dollar index maintained its recent decline around 105, staying near three-week lows before the US jobs report which potentially will reveal further signs of a cooling labor market. Earlier in the week, data highlighted an unexpected contraction in services activity and disappointing private employment figures in the US, reinforcing a dovish sentiment towards Fed policy. Currently, markets are pricing in a roughly 73% probability of rate cuts by the Fed starting in September. Externally, the dollar encountered pressure from a strengthening euro following concerns expressed by ECB policymakers about recent inflation trends. Meanwhile, the British pound strengthened on indications from polls suggesting a decisive victory for the Labor Party in the upcoming UK general election.
Gold rose to approximately $2,360 per ounce on Friday and was on track for its second weekly gain. Earlier in the week, data revealing a surprise contraction in US services activity and disappointing private employment figures supported a cautious outlook on Fed policy. Markets currently expect a 73% likelihood of Fed rate cuts beginning in September. Political developments in Europe were under watch, including the Labor party victory in the UK general election and projections that Marine Le Pen’s National Rally party would fall short of a majority in France’s parliamentary election. Additionally, escalating geopolitical tensions in the Middle East, involving Israel’s dual challenges with Hamas and Hezbollah, continued to support demand for gold as a safe-haven asset.
EUR/USD Eyes Resistance at 1.0830 After Closing Higher
The EUR/USD pair, which closed higher yesterday, is expected to encounter its first resistance at 1.0830, followed by subsequent levels at 1.0865 and 1.0900 above this point. On the downside, the initial support is at 1.0810, with further levels to watch at 1.0780 and 1.0750 below this level.
For gold, the first resistance will be at 2375, with subsequent levels to watch above at 2395 and 2405. On the downside, the initial support is at 2360, with further levels to monitor below at 2345 and 2330.
Market Focus Shifts to Upcoming US CPI and PPI Releases
On Monday, the dollar index remained below 105 after a nearly 1% decline the previous week, influenced by disappointing US economic data and a rising unemployment rate of 4.1% in June. Market sentiment indicates a 76% probability of a Fed rate cut in September and another by December. Investors await US inflation figures and Fed guidance. The dollar edged up against the euro after the French election hinted at a hung parliament.
WTI crude futures slipped below $83 per barrel, extending losses amid mixed US employment data and concerns about economic slowdown affecting oil demand. A potential Gaza ceasefire and closed Texas ports due to Tropical Storm Beryl also influenced prices.
Gold eased below $2,390 per ounce but remained near six-week highs, driven by expectations of Fed rate cuts in response to weak US economic data. Markets are pricing a 78% chance of a September rate cut. Focus is on upcoming US CPI and PPI releases, Fed Chair Powell’s testimony, and political developments in France.
EUR/USD Pair Starts Week with Downward Gap, Recovery in Progress
The pair, which started the week with a downward gap, continues its recovery effort. The initial resistance is at 1.0830, followed by 1.0865 and 1.0900 above that. On the downside, the first support is at 1.0810, with subsequent supports at 1.0780 and 1.0750 below that.
Gold’s Initial Resistance at 2400 Amid Flat Start to the Week
In the yellow metal, which started the week flat, the initial resistance is at 2400, with subsequent levels at 2430 and 2450 above that. On the downside, the first support is at 2375, followed by 2365 and 2350 below that.
Market Review: Investors Eye Powell’s Testimony as Gold Surges Past $2,360
Gold climbed above $2,360 per ounce on Tuesday, recovering from losses as investors focused on Fed Chair Powell’s testimony before Congress. Last week’s data revealed a weakening US labor market, with unemployment hitting a two-and-a-half-year high and wage growth dropping to a three-year low, suggesting potential early rate cuts by the Fed. Markets are pricing in a 77% probability of a September rate reduction and another in December. Investors await crucial inflation data on Thursday, while monitoring Middle East geopolitical developments.
The yen weakened to around 161 per dollar, reversing gains as investors awaited Powell’s testimony and upcoming US inflation data. Last week, the yen dropped to new 38-year lows due to significant interest rate differentials and the BoJ’s reluctance to normalize policies. Speculation of a potential rate hike at the BoJ’s late July meeting is growing, while recent yen strength was due to disappointing US economic indicators and possible Japanese intervention.
The dollar index stabilized around 105 on Tuesday ahead of Powell’s testimony and US inflation data, which could provide insights into future rate movements. The index remained near its lowest in over three weeks, following a nearly 1% decline last week due to soft US economic indicators. Market sentiment reflects a 76% likelihood of a September Fed rate cut, with another expected in December. Investors are also evaluating potential impacts from French political developments and the upcoming Reserve Bank of New Zealand policy decision.
In the EUR/USD pair, the initial resistance will be at 1.0830, followed by 1.0865 and 1.0900 if this level is surpassed. On the downside, the first support is at 1.0810, with subsequent supports at 1.0780 and 1.0750 below that.
In gold, the first support is at 2355, with subsequent levels at 2335 and 2320 below that. Above, the initial resistance is at 2375, followed by 2395 and 2430 if this level is surpassed.
Gold Prices Climb Toward $2,370 with Fed Rate Cut Speculation
The price of gold rose towards $2,370 per ounce on Wednesday, continuing its upward trend from the previous day after speculation of imminent interest rate cuts by the Federal Reserve increased. All eyes are now on the release of US CPI data as traders adjust their positions. During his hearing before Congress, Fed Chairman Powell acknowledged improvements in the second quarter data but emphasized the need for additional information to boost confidence in the inflation outlook. Powell also pointed to a slowdown in the US economy and signs of easing in the labor market, reinforcing expectations of possible rate cuts. The markets currently expect a 73% probability of interest rate cuts by the Fed in September. In addition, the precious metal has been supported by rising demand for gold exchange-traded funds, which saw inflows for the second time in June.
Following the Reserve Bank of New Zealand’s decision to maintain interest rates at 5.5% for the eighth meeting, the New Zealand dollar dropped to approximately $0.609. The central bank, as anticipated, emphasized its commitment to keeping monetary policy restrictive until inflation returns within its targeted 1 to 3% range. Significant progress towards achieving this goal was acknowledged, with expectations now set for inflation to stabilize within the target band in the latter half of the year. Investor focus has shifted to upcoming second-quarter inflation data from New Zealand, expected next week, which is anticipated to provide further guidance. Additionally, the Kiwi faced external pressure from a strong US dollar following remarks by Fed Chair Jerome Powell to the Senate, reiterating the Federal Reserve’s cautious stance on potential interest rate cuts.
On Wednesday, the dollar index advanced towards 105.2, marking its third consecutive session of gains, following remarks from Federal Reserve Chair Jerome Powell reaffirming the central bank’s cautious stance on interest rate cuts. Powell emphasized the Fed’s requirement for more conclusive data indicating sustainable inflation movement towards 2% before considering rate reductions. However, he cautioned against maintaining restrictive policies excessively, which could inadvertently dampen economic activity and employment. Investors are now focused on Powell’s upcoming testimony before the House and upcoming US inflation data later this week for further insights into future monetary policy directions. Despite market expectations indicating a greater than 70% likelihood of a Fed rate cut in September, with a second decrease nearly fully anticipated by December, the dollar showed cautious gains against most major currencies, while adopting a careful approach against the New Zealand dollar before the Reserve Bank of New Zealand’s policy decision.
EUR/USD Eyes Resistance at 1.0830, Support at 1.0810
The initial resistance will be at 1.0830 for EUR/USD, followed by 1.0865 and 1.0900 if this level is surpassed. On the downside, the first support is at 1.0810, with subsequent supports at 1.0780 and 1.0750 below that.
GBP/USD Eyes Support at 1.2775, Resistance at 1.2820
In GBP/USD, the first support is at 1.2775, with subsequent levels at 1.2735 and 1.2680 below that. On the upside, the initial resistance is at 1.2820, followed by 1.2860 and 1.2900 if this level is surpassed.
Market Outlook: UK Economy Surpasses Expectations with 0.4% Growth in May 2024
In May 2024, the British economy expanded by 0.4% month-over-month, surpassing the expected 0.2%. Liz McKeown of ONS credited strong performances in retail, wholesale, and construction. Construction saw its fastest growth in nearly a year, driven by house building and infrastructure projects. The services sector grew by 0.3%, matching April. Retail trade rose by 2.9%, while professional, scientific, and technical activities grew by 1%. Industrial production increased by 0.2%, recovering from a 0.9% decline in April, led by a 0.4% rise in manufacturing. Food products, beverages, and tobacco production increased by 1.7%. Construction output surged by 1.9%, reversing a 1.1% contraction in April, with new construction work up 2.7% and repair and maintenance activities up 0.8%.
On Thursday, gold climbed above $2,380 per ounce for the third session, driven by anticipation of US CPI data. Analysts expect annual CPI inflation to drop from 3.3% to 3.1% in June, with core CPI steady at 3.4%. Fed Chair Powell reiterated that rate cuts will depend on more data. Markets indicate a 73% chance of a September rate cut, with another cut expected by December. Global gold ETFs saw inflows for the second month, driven by funds in Europe and Asia.
On Thursday, the dollar index held just below 105 as traders awaited the US inflation report. The June CPI report is expected to show a 0.1% increase in consumer prices, with core CPI up 0.2%. Fed Chair Powell commented that waiting for inflation to hit 2% might be too late, emphasizing the need for more data. Market sentiment reflects a 70% chance of a September Fed rate cut, with another cut expected by year-end. The dollar faced pressure against the pound as the Bank of England ruled out August rate cuts.
EUR/USD Faces Key Support at 1.0810 Amid Market Movements
In the currency pair, the initial resistance will be at 1.0865, followed by 1.0900 and 1.0950 if this level is surpassed. On the downside, the first support is at 1.0810, with subsequent supports at 1.0780 and 1.0750 below that.
