Gold Fell on Stronger US Building Permits Report
The gold (XAU) price declined by 0.41% as the US Dollar Index (DXY) rose following the higher-than-expected US Building Permits report.
On Wednesday, a US report showed that building permits increased by 3.4% in June 2024, reaching a seasonally adjusted annual rate of 1.446 million—the highest level in three months.
The data exceeded market expectations of 1.4 million, according to preliminary estimates. The CME FedWatch Tool showed that the chances of a rate cut by the Fed in September slightly decreased, and market participants began closing their long positions in gold.
Lowering rates and the upcoming US elections are two factors that are likely to push XAU/USD beyond $2,500, as the metal typically gains in periods of economic and geopolitical uncertainty.
Investors might consider hedging their equity and currency positions amid the potential global trade war between the US and China, which could further boost precious metals prices.
XAU/USD rose during the Asian and early European trading sessions. Investors now await the Initial Jobless Claims report today at 12:30 p.m. UTC. This report is expected to provide more insights into the central Federal Reserve's monetary policy policy outlook.
If labor market data are strong, gold will continue its downward correction. Otherwise, the report may push the gold price towards $2,490.
Euro Stays Bullish as the DXY Falls
On Wednesday, EUR/USD gained 0.37% and finished the day just below the 1.09400 resistance level. Meanwhile, the US dollar index (DXY) broke below the support level at 104.000 and lost 0.48%.
The US dollar remained near its lowest level in four months, as comments from Federal Reserve (Fed) officials increased chances of a rate reduction in September.
Investors are fully anticipating a 25-basis-point (bps) rate cut in September. Also, the probability of another rate reduction in November is 59.5% after Fed officials stated that the US central bank is closer to monetary policy easing, noting progress in bringing inflation closer towards the 2% target.
Investors will focus on the European Central Bank (ECB) policy decision this afternoon. The market expects the regulator won't change the base rate at the meeting, but officials' comments will be crucial in determining the timing of future interest rate reductions.
EUR/USD has been moving within a relatively narrow range of 1.09320–1.09400 during Asian and early European trading hours. The market awaits the European Central Bank (ECB) rate decision at 12:15 p.m. UTC.
Also, two reports at 12:30 p.m. UTC may increase volatility in EUR/USD: the US Jobless Claims and the Philadelphia Fed Manufacturing Index. If the data is lower than expected, the pair may move towards 1.10000.
Meanwhile, stronger-than-anticipated numbers may bring EUR/USD down towards the 1.09000 support level.
Australian Dollar Continues to Rise on Strong Australian Jobs Report
The Australian dollar (AUD) rallied above 0.67500 against the US dollar (USD) on Wednesday but failed to hold above this level and lost most of the gains.
AUD/USD has been in a clear bullish trend since mid-April as the divergence in monetary policy expectations between the Reserve Bank of Australia (RBA) and the Federal Reserve (Fed) shifted in favor of AUD.
Indeed, while the US macroeconomic data, Consumer Price Index (CPI) and Purchasing Managers' Indices (PMIs) reports, have been coming out softer-than-expected lately, the Australian reports surprised on the upside.
Most importantly, the Australian annual inflation rate remains above the central bank's target and higher than the US price pressure.
Thus, the market doesn't expect the RBA to cut its base rate until spring 2025, contrasting sharply with investors' outlook for the Fed's interest rate path.
Currently, interest rate swap market data implies roughly 140 basis points (bps) worth of rate cuts by the Fed until July 2025 but only 30 bps worth of rate cuts by the RBA. Fundamentally, the pressure on AUD/USD remains bullish.
AUD/USD was rising during the Asian and early European trading session after the Australian Bureau of Statistics published its latest Employment Report for June. It painted a mixed picture of the Australian labor market, leaving the question of whether interest rates need to rise further.
Australian employment figures jumped well beyond expectations, but the jobless rate also increased as more people went looking for work.
Later today, the US Jobless Claims report and the Philly Fed Manufacturing Index reports will be released at 12:30 p.m. UTC and may add more volatility to AUD/USD.
If the data indicates persistent weakness in the US economy, the pair will continue to rise, probably above 0.67600.
Conversely, stronger-than-expected results may push the pair down towards 0.67000.