Gold Rises on Continuing Geopolitical Tensions
Gold (XAU/USD) rose by 1.07% on Thursday, the day after the Federal Reserve (Fed) cut interest rates for the first time in four years. The rise happened despite the lower-than-anticipated US Jobless Claims report. XAU/USD finished the trading session below $2,600, ready to go higher.
The US Department of Labor reported 219,000 new unemployment claims last week, below the estimate of 229,000, according to MarketWatch. The better-than-expected data eased concerns about the health of the US labor market. Still, the Fed interest rate decision plays a bigger role in determining the future dynamic of the gold price.
"Overall, the market appears to be primed for consolidation after a strong rally ahead of the meeting. However, the prospect of reduced funding costs in the upcoming months will likely provide additional support", noted Saxo Bank analysts.
Also, the conflict between Israel and Lebanon additionally supports the precious metal. Yesterday, Israel launched a wave of airstrikes in southern Lebanon, the most intensive actions of the last few days. A new round of geopolitical tensions can support gold prices or even push it towards new maximums.
XAU/USD continued to rise during Asian and early European trading sessions. The price is getting closer to the resistance level of $2,600, and it seems ready to establish new maximums. No major economic events are scheduled for today, although new geopolitical factors can affect the market.
Euro Rises Despite Better-Than-Expected US Data
The euro (EUR/USD) gained 0.39% against the US dollar (USD) yesterday, even though US macroeconomic data generally came out better than expected.
The market continues to price in more rate cuts by the Federal Reserve (Fed) later this year and in 2025. Interest rate swaps market data implies roughly 200 basis points (bps) worth of rate cuts by the Fed and less than 165 bps of cuts by the European Central Bank (ECB) by the end of 2025. As a result, the fundamental pressure on the EUR/USD remains bullish.
However, there is a high risk that investors' monetary policy expectations may begin to change, especially if the US data continues to be stronger than expected. Indeed, the latest statistics—Retail Sales, Jobless Claims, New York and Philadelphia Manufacturing Indices reports—didn't support the case for more rate cuts. Fed Chair Jerome Powell said on Wednesday that he sees no recession risks.
At the same time, the ECB may be forced to pursue a more dovish monetary policy as a stagnating manufacturing and industrial base in Germany clouds the eurozone economic outlook. ‘The hope for a swift improvement in the economic situation is visibly fading’, said Achim Wambach, president of ZEW Economic Research Institute.
EUR/USD rose slightly during the Asian and early European trading sessions. Today, traders should watch the speeches of central bank officials. Christine Lagarde, the ECB President, will speak at 03:00 p.m. GMT, and FOMC member Patrick Harker will give a speech at 06:00 p.m. GMT. Investors will be looking for any clues on future changes in monetary policies. Arguably, Christine Lagarde's remarks will be more important. If she sounds less hawkish or more dovish than expected, EUR/USD will weaken.
Bitcoin Surges Above $63,000 on Dovish Fed Decision
Bitcoin (BTC) rose above $63,000 following the Federal Reserve's (Fed) dovish interest rate decision.
The Fed cut the base rate by 50 basis points (bps) on Wednesday, decreasing the interest rate for the first in four years. By Thursday, the US Dollar Index (DXY) remained near a 14-month low at 100.600, pressured by a rally in risk assets such as Bitcoin and increased optimism for a US economy's soft landing.
The Fed expressed confidence in inflation nearing 2%, and the decision aimed to prevent a labor market slowdown. However, Fed Chair Jerome Powell clarified that the central bank isn't hurrying to ease policy further, and 50 bps cuts won't become the norm. The US dollar (USD) also weakened on concerns that other central banks might adopt less aggressive monetary policies.
During the COVID-19 crisis in 2020, the Fed sharply cut interest rates towards 0–0.25%, which played a key role in driving Bitcoin's price from around $5,000 to an impressive $60,000. However, a series of rate hikes between March and December in 2022 increased rates towards 4.25–4.50% and caused Bitcoin to plunge from $46,000 to $16,000. Now, with the Fed starting to reduce interest rates, we could see a similar positive influence on Bitcoin, although the effect might be less noticeable.
BTC/USD rose by 1.28% and reached $64,000 during the Asian trading hours. No major releases could influence the pair, so Bitcoin may continue its upward trend today. Traders are still digesting the Fed interest rate decision and trying to figure out the possible BTC/USD trend.