Gold Price Regains Traction, EUR/USD Stabilizes Ahead of PCE Price Index Data

Gold price struggles to gather a directional move, fluctuating in a tight channel above $2,030 on Thursday. 

The benchmark 10-year US Treasury bond yield is attempting to recover gains near 3.9% ahead of US data, but this doesn’t seem to provide traction to XAU/USD.

XAUUSD Daily Chart

Gold Price Regains Traction

On Thursday, the Gold price (XAU/USD) regains positive traction and reverses a significant portion of the previous day’s downfall. This is largely due to the underlying bearish sentiment surrounding the US Dollar (USD). Growing acceptance that the Federal Reserve (Fed) will pivot away from its hawkish stance and start cutting interest rates as early as March 2024 has dragged the US Treasury bond yields to a multi-month low. This situation benefits the US Dollar-denominated commodity.

Global Rate-Cutting Cycle

The prospect of a global rate-cutting cycle suggests that the path of least resistance for the non-yielding Gold price remains to the upside. The median forecast in Federal Open Market Committee (FOMC) members’ Summary of Economic Projections has the federal-funds rate ending 2024 at 4.6%, signalling three 25 basis points (bps) rate cuts.

Impact of Inflation Data and Interest Rate Cuts

Softer-than-expected inflation data from the Eurozone, along with the softening in rhetoric from several European Central Bank (ECB) members, suggest that the risk has now shifted towards earlier rate cuts. However, Fed and ECB officials have been pushing back against market bets for rapid interest rate cuts next year, holding back bulls from placing aggressive bets around the Gold price. Traders also prefer to wait on the sidelines ahead of key US data releases.

Key Data Risk and USD Demand

In the run-up to the key data risk, traders on Thursday will take cues from the US economic docket – featuring the final Q3 GDP print, the usual Initial Weekly Jobless Claims and the Philly Fed Manufacturing Index. This, along with the US bond yields, will drive the USD demand and provide some impetus to the Gold price later during the early North American session.

EUR/USD Stabilization

EUR/USD stabilized after recovering toward 1.0950 early Thursday, bouncing back from the intraday low at 1.0929 incurred in the previous session. The US economic docket will feature weekly Initial Jobless Claims and final revisions to Q3 GDP.

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Wall Street’s Impact and US Economy Forecast

In the late American session, Wall Street’s main indexes turned south, reflecting a negative shift in risk mood. Early Thursday, US stock index futures trade in positive territory, pointing to an improving market mood. The US Bureau of Economic Analysis will release the final revision to third-quarter (GDP). The US economy is forecast to expand at an annual rate of 5.2%. A downward revision could weigh on the USD with the immediate reaction.

GBP/USD: A Focus on US GDP Data

The GBP/USD pair maintains its position below 1.2650, focusing on US GDP data. After a sharp decline prompted by soft UK inflation data on Wednesday, the pair seems to have stabilized below 1.2650 on Thursday. The revisions to the US’ third-quarter GDP will be closely watched later in the day.

Impact of Soft UK Inflation Data on GBP/USD

GBP/USD stabilized near 1.2650 early Thursday after losing nearly 100 pips on Wednesday. Despite a near-term technical outlook suggesting a loss of bearish momentum, the pair may struggle to rise steadily following the soft inflation readings from the UK.

Market Position Shifts Towards Earlier BoE Policy Pivot

Market positioning has shifted towards an earlier Bank of England (BoE) policy pivot following the UK Consumer Price Index (CPI) readings for November, which came in below analysts’ forecasts on Wednesday. Goldman Sachs now predicts that the BoE will opt for a 25 basis points rate cut in May, compared to their previous forecast of June.

USD Struggles Amid Improving Risk Mood

The US Dollar (USD) is struggling to find demand early Thursday, helping GBP/USD maintain its position. US stock index futures were last seen rising between 0.4% and 0.6%, reflecting an improving risk mood. If Wall Street’s main indexes open higher and gather bullish momentum in the second half of the day, the USD could continue to weaken against its peers.

Potential Impact of US Economic Docket

The US economic docket will feature the final revision to the third-quarter Gross Domestic Product growth alongside the weekly Initial Jobless Claims. If the number of first-time applications for unemployment benefits rises at a stronger pace than anticipated, the USD could come under pressure. Conversely, a reading at or below 200K could provide a boost to the USD, potentially triggering another downward shift in GBP/USD.

GBPUSD Daily Chart

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All information has been prepared by TraderFactor or partners. The information does not contain a record of TraderFactor or partner’s prices or an offer of or solicitation for a transaction in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information. Any material provided does not have regard to the specific investment objective and financial situation of any person who may read it. Past performance is not a reliable indicator of future performance. 

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  Zahari Rangelov

  Zahari Rangelov is an experienced professional Forex trader and trading mentor with knowledge in technical and fundamental analysis, medium-term trading strategies, risk management and diversification. He has been involved in the foreign exchange markets since 2005, when he opened his first live account in 2007. Currently, Zahari is the Head of Sales & Business Development at TraderFactor's London branch. He provides lectures during webinars and seminars for traders on topics such as; Psychology of market participants’ moods, Investments & speculation with different financial instruments and Automated Expert Advisors & signal providers. Zahari’s success lies in his application of research-backed techniques and practices that have helped him become a successful forex trader, a mentor to many traders, and a respected authority figure within the trading community.

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UK November CPI Rises Slower, GBP/USD Drops

The United Kingdom’s Consumer Price Index (CPI) saw an annual increase of 3.9% in November, a decline from October’s 4.6% rise. This figure was lower than the market’s anticipated acceleration of 4.4%. Meanwhile, the Consumer Prices Index including owner occupiers’ housing costs (CPIH) rose by 4.2% year over year to November 2023, down from 4.7% in October 2023.

On a monthly basis, both CPI and CPIH fell, with the former dropping by 0.2% and the latter decreasing by 0.1%. These figures contrast with November 2022’s rise of 0.4% for both indices.

Key Contributors to Inflation Trends

The most significant downward contributions to the monthly change in both CPIH and CPI annual rates were from transport, recreation and culture, and food and non-alcoholic beverages.

Core Inflation Figures

Excluding volatile items such as energy, food, alcohol, and tobacco, core CPIH rose by 5.2% in the 12 months to November 2023, down from 5.6% in October. Similarly, core CPI increased by 5.1% year over year in November, a decrease from October’s 5.7%. Both figures were lower than the expected 5.6%.

GBP/USD Reaction to Inflation Data

The release of the UK’s inflation data triggered a selling wave for the GBP/USD, causing it to drop below 1.2700. The pair has fallen 0.60% on the day, trading above 1.2650.

Long-Term Inflation Trends

The CPIH rose by 4.2% in the 12 months to November 2023, down from October’s 4.7% and a peak of 9.6% in October 2022. This suggests that the October 2022 rate was the highest in over 40 years. In contrast, November 2023’s annual rate was the lowest since October 2021.

Index	Nov 2023 YoY	Oct 2023 YoY	Nov 2023 MoM	Nov 2022 MoM
CPI	3.9%	4.6%	-0.2%	0.4%
CPIH	4.2%	4.7%	-0.1%	0.4%
Core CPI	5.1%	5.7%	N/A	N/A
Core CPIH	5.2%	5.6%	N/A	N/A

Disclaimer:

All information has been prepared by TraderFactor or partners. The information does not contain a record of TraderFactor or partner’s prices or an offer of or solicitation for a transaction in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information. Any material provided does not have regard to the specific investment objective and financial situation of any person who may read it. Past performance is not a reliable indicator of future performance. 

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  Zahari Rangelov is an experienced professional Forex trader and trading mentor with knowledge in technical and fundamental analysis, medium-term trading strategies, risk management and diversification. He has been involved in the foreign exchange markets since 2005, when he opened his first live account in 2007. Currently, Zahari is the Head of Sales & Business Development at TraderFactor's London branch. He provides lectures during webinars and seminars for traders on topics such as; Psychology of market participants’ moods, Investments & speculation with different financial instruments and Automated Expert Advisors & signal providers. Zahari’s success lies in his application of research-backed techniques and practices that have helped him become a successful forex trader, a mentor to many traders, and a respected authority figure within the trading community.

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EUR/USD Ascends Amidst Weak USD, Stocks Show Slight Increase

The EUR/USD pair saw a bullish surge, moving beyond the 1.0950 mark during the early American trading session on Tuesday. 

This rise was fueled by the weakening US Dollar, which has been pressured by declining US Treasury bond yields and mixed data from the US.

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Economic Data Releases

In the meantime, the EU released the final estimate of the November Harmonized Index of Consumer Prices (HICP), confirming the annual gauge at 2.4%. On a monthly basis, the HICP decreased by 0.6%. The US will release data on November Building Permits and Housing Starts during its session. Additionally, Canada will publish the November Consumer Price Index (CPI), starting a series of inflation updates that will conclude on Friday with the US Core Personal Consumption Expenditures (PCE) Price Index.

Unappealing USD Post-Central Banks’ Scenario

The EUR/USD pair continues its modest weekly rise as the US Dollar remains unattractive following the recent central banks’ activities. Investors are in search of better options.

Despite this, Wall Street ended positively on Monday, with the Nasdaq Composite reaching record highs due to sustained optimism. Nonetheless, the lack of significant macroeconomic data keeps most major pairs within familiar ranges, with the EUR/USD currently hovering around 1.0950.

Commentary from European Central Bank (ECB) Officials

ECB officials observed that there are still considerable uncertainties and downside risks for Eurozone banks. Meanwhile, Governing Council through it’s member stated that expectations of rate cuts were overly optimistic, suggesting investors may have jumped the gun.

Economic Data Releases

In an unforeseen development, US new-home construction witnessed a significant boost in November, reaching a six-month peak. This upswing is attributed to the current scarcity of existing homes in the market, indicating a potential alleviation in the residential real estate crunch. According to government data released on Tuesday, residential starts saw a 14.8% rise last month, hitting a 1.56 million annualized rate. This figure surpassed the median prediction of a 1.36 million pace from a Bloomberg survey of economists.

Meanwhile, Canada’s Consumer Price Index (CPI) recorded a year-over-year increase of 3.1% in November, mirroring the rise observed in October. The CPI was driven by higher prices for travel tours in November. However, this upward trend was counterbalanced by slower price growth for food, coupled with reduced prices for cellular services and fuel oil. Removing the influence of food and energy, the CPI noted a 3.5% increase in November, a slight uptick from a 3.4% rise in October.

US Stocks Show Slight Increase

US stocks experienced a small increase on Tuesday, with the possibility of an eighth consecutive weekly win still in sight. Investors remain optimistic about the potential for interest rate cuts, despite warnings that these hopes may be overblown.

The Dow Jones Industrial Average (^DJI) saw a minute rise of approximately 0.1%. This was closely followed by the S&P 500 (^GSPC), which ascended by around 0.2%. The tech-heavy Nasdaq Composite (^IXIC) outperformed both, leaping by about 0.3% in the early morning trading session.

Federal Reserve’s Stance on Rate Cuts

However, some momentum has been lost from the recent rally in stocks as Federal Reserve officials have attempted to dampen expectations of a rate cut as soon as March. They’ve declared it “premature” to assume the central bank has finished with rate hikes, and indicated that its policy will continue to be driven by data.

Bank of Japan’s Decision on Interest Rates

In other news, the Bank of Japan decided on Tuesday to maintain interest rates below zero, providing no indication of when it might withdraw from negative levels.

US Stock Market’s Reaction to Warnings

Despite these cautionary signs, US stocks have managed to sustain their gains. Investors seem to be disregarding these warnings for the moment. The upcoming update on the Personal Consumption Expenditures price index, which is the Fed’s preferred measure of inflation, is expected to support or challenge the case for quicker and earlier cuts.

Impact of Oil Prices on Investor Sentiment

Investors are also paying close attention to oil prices, as more companies follow BP’s lead in avoiding transits through the Red Sea due to attacks on shipping in this crucial trade route. West Texas Intermediate (CL=F) dropped slightly below $73 a barrel, while Brent crude futures (BZ=F) traded above $78 a barrel.

Disclaimer:

All information has been prepared by TraderFactor or partners. The information does not contain a record of TraderFactor or partner’s prices or an offer of or solicitation for a transaction in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information. Any material provided does not have regard to the specific investment objective and financial situation of any person who may read it. Past performance is not a reliable indicator of future performance. 

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Author

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  Zahari Rangelov

  Zahari Rangelov is an experienced professional Forex trader and trading mentor with knowledge in technical and fundamental analysis, medium-term trading strategies, risk management and diversification. He has been involved in the foreign exchange markets since 2005, when he opened his first live account in 2007. Currently, Zahari is the Head of Sales & Business Development at TraderFactor's London branch. He provides lectures during webinars and seminars for traders on topics such as; Psychology of market participants’ moods, Investments & speculation with different financial instruments and Automated Expert Advisors & signal providers. Zahari’s success lies in his application of research-backed techniques and practices that have helped him become a successful forex trader, a mentor to many traders, and a respected authority figure within the trading community.

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