Gold Rises on Weak US Data
Gold (XAU/USD) rose by 0.67% on Thursday, closing slightly below the $2,720 resistance level.
The US Department of Commerce reported yesterday that retail sales rose by 0.4% in December, below the expected 0.5% increase and down from the revised 0.8% rise in November. Also, the US core Consumer Price Index (CPI) slightly declined in December. Meanwhile, the number of initial claims for unemployment benefits rose towards 217,000, above the expected 210,000. Weaker-than-expected data fuelled hopes that the Federal Reserve (Fed) may accelerate interest rate reductions, lowering the US dollar.
According to Christopher Louney, commodities strategist at RBC Capital Markets, the data dependency of gold is evident in its pricing, particularly in light of this week's inflation reports and the subsequent shift in swap traders' sentiment towards anticipating a rate reduction by July.
"Despite our unchanged price outlook, this serves as an indication of the fluctuations in strength and weakness that we anticipate in the market for gold. Overall, this should contribute to the stability of gold's hold and its resilience", stated Louney. Michael Langford, Chief Investment Officer at Scorpion Minerals, highlighted that increased uncertainty surrounding the incoming Donald Trump administration's actions influences gold as a tool for trading short-term volatility.
XAU/USD was moving sideways within a range of $2,710–$2,717 during Asian and early European trading hours. Today, no important economic news is expected.
According to Reuters analyst Wang Tao, "Spot gold may test support at $2,706 per ounce. A break below could open the way towards the $2,685 to $2,693 range".
Euro Remains Flat Amidst Mixed US Economic Data
On Thursday, the euro (EUR/USD) was virtually unchanged against the US dollar (USD) as several macroeconomic indicators painted a rather mixed picture of the US economy.
Yesterday's reports revealed that the US retail sales rose by less than expected in December, but November figures were revised higher. Meanwhile, the number of Americans filing new applications for unemployment benefits increased more than expected last week but remained at levels showing a healthy labour market. At the same time, the Philadelphia Fed Business Index jumped towards 44.3 in January, substantially higher than expected −5.
"I think retail sales didn't really have a significant impact. CPI initially had an impact in terms of weakening the dollar, but that was quickly reversed. And I think that just indicates that the market is still strongly biased to buy the dollar on dips, probably in anticipation of the inauguration next week and the potentially dollar-supportive policies of the incoming Trump administration, including the possibility that tariffs will be raised relatively quickly", said Vassili Serebriakov, FX strategist at UBS Investment Bank.
As for the US monetary policy, the latest data continues to support the case for fewer rate cuts by the Federal Reserve (Fed) this year. The market prices in no more than two 25-basis-point rate cuts in 2025.
Overall, the fundamental pressure on EUR/USD remains bearish, but the pair lacks new fundamental impulses to move even lower. Indeed, while European Central Bank (ECB) policymakers anticipated further interest rate cuts, the minutes from their December meeting revealed a cautious stance due to several uncertainties that could hinder inflation from reaching its 2% target.
EUR/USD was essentially flat during the Asian and early European trading sessions. Today, the macroeconomic calendar is rather uneventful. Traders may use this opportunity to take profit on their short positions, possibly triggering a technical rebound in EUR/USD.
Crypto Industry Awaits Donald Trump's Inauguration
On Thursday, Bitcoin (BTC) experienced significant volatility due to recent economic developments in the US and President Donald Trump's proposal for an executive order designating cryptocurrencies as a policy priority. BTC/USD lost 0.53% by the end of the day.
On Thursday, the US Department of Commerce reported that retail sales increased by 0.4% in December, compared with a revised 0.8% increase in November, below the expected 0.5%. This data follows a slight decrease in the core Consumer Price Index (CPI), excluding food and energy prices, which sparked hopes that the Federal Reserve (Fed) would speed up interest rate cuts. The data put downward pressure on the US dollar (USD). Also, initial claims for unemployment benefits increased towards a seasonally adjusted 217,000 during the week ending 11 January, exceeding the forecasted 210,000.
According to reports, Donald Trump is expected to issue an order designating cryptocurrency as a national priority as soon as he returns to office on 20 January. Bloomberg reported, citing sources familiar with the matter, that the order will direct regulatory agencies to work with industry representatives. It may also establish a cryptocurrency council to promote industry policy objectives. The order is expected to come out on 20 January, but it's not yet finalized and might be changed before being released to the public. The crypto industry strongly supported Trump's campaign, and the incoming president promised to make the US a 'crypto capital'.
BTC/USD was rising during Asian and early European trading hours. Market participants are awaiting Donald Trump's inauguration and are optimistic about his future plans related to crypto. Overall, no significant events are expected today that could influence the pair.