Gold Grows Despite the Higher-Than-Expected US CPI Data
Gold (XAU/USD) reversed on Thursday midafternoon, following four consecutive bearish trading sessions. Although the US dollar (USD) rose after higher-than-expected Consumer Price Index (CPI) report data, XAU/USD gained 0.87% by the end of the trading day. Additionally, continuing conflict in the Middle East supported precious metal prices.
CPI numbers increased by 0.2% in the prior month, following a similar rise of 0.2% in August. Over the last 12 months through September, CPI climbed 2.4%, representing the smallest year-over-year increase since February 2021. This figure was higher than the expected 0.1% and projections of 2.3%. The data supported the market's belief that the Federal Reserve (Fed) would reduce interest rates by 25 basis points (bps) at their upcoming meeting in November. Markets are pricing in a 90% probability of this action, according to the CME FedWatch Tool.
Before the CPI release, some analysts were concerned about a more significant inflation increase than anticipated. This could cause the Fed to delay cutting rates at their next meeting, given the strong nonfarm payroll data reported last week.
"It is not a terrible development, but it is certainly not positive news", said Peter Cardillo, the Chief Market Economist of Spartan Capital Securities.
He stated that it simply indicates that the best improvements in inflation may have passed for the next several months.
XAU/USD continues to rise during Asian and early European trading hours. Today, the US Producer Price Index data report comes out at 12:30 p.m. UTC. A higher-than-expected reading may put bearish pressure on the precious metal, while softer data will prolong the bullish trend.
"Spot gold is expected to test resistance at $2,650 per ounce, a break above which could open the way towards the $2,659 to $2,673 range", states Reuters analyst Wang Tao.
The Euro Holds Ground on Mixed US Economic Data
Yesterday's trading session was very volatile: the euro (EUR/USD) dropped towards the 1.09000 level against the US dollar (USD), but EUR/USD managed to close the day essentially unchanged.
On Thursday, investors had to digest rather contradictory US economic reports. On the one hand, the Consumer Price Index (CPI) report showed a slight uptick in inflation, suggesting that the Federal Reserve (Fed) may need to slow the pace of rate cuts. On the other hand, weekly Jobless Claims figures substantially exceeded market expectations, indicating a growing weakness in the labour market.
On balance, the market preferred to focus on the labour market data, and the US Dollar Index (DXY) declined. Still, yesterday's recovery in EUR/USD lacked confidence, with the general trend remaining bearish.
"The market's been in a bit of a tug of war between caring more about inflation versus caring more about employment", said Brad Bechtel, global head of FX at Jefferies.
Indeed, yesterday's reports added more uncertainty about the path of US interest rates. In a Wall Street Journal interview on Thursday, Raphael Bostic, Atlanta Fed President, said he would be ‘totally comfortable’, skipping an interest-rate cut at an upcoming US central bank's meeting. He added that the ‘choppiness’ in recent data on inflation and employment may warrant leaving rates unchanged in November. Currently, traders are pricing in a nearly 84% chance that the Fed will cut rates by 25 basis points (bps) at its next policy meeting on 7 November and a nearly 16% probability of no change.
Meanwhile, the European Central Bank (ECB) is now expected to deliver more rate cuts over the next six months than the Fed. The latest interest rate swaps market data indicates almost 100 bps worth of rate cuts by the ECB by April 2025 compared to less than 90 bps by the Fed. Thus, the fundamental pressure on EUR/USD remains bearish.
EUR/USD was falling during the Asian and early European trading sessions on Friday. The market will receive more US economic data today: Producer Price Index (PPI) report is due at 12:30 p.m. UTC, and Consumer Confidence report is scheduled for 2:00 p.m. UTC. Arguably, the sentiment report will likely impact the market more significantly. Higher-than-expected results will probably extend the bearish trend in EUR/USD towards 1.09100. Lower-than-expected figures may pull the pair upwards, towards 1.09600.
Bitcoin Dips Below $60,000, but Bulls Defend the Key Support Level
Bitcoin (BTC/USD) fell below $60,000 on Thursday, but bulls managed to hold the key level.
Bitcoin has been moving within a descending parallel channel since 14 March and recently faced a pullback at its upper boundary, indicating the potential for further downward correction. This move suggests a possible drop towards the mid-line at $58,000 or even to the lower boundary around $50,000. A strong bullish trend is unlikely unless BTC rises above $66,000, a key resistance area in recent weeks.
In the past three days, major Bitcoin holders have ‘sold or redistributed’ approximately 30,000 BTC—valued at over $1.8 billion. This data comes from on-chain analytics firm Santiment. The recent sell-off aligns with a phase where short-term BTC holders have been steadily exiting the market, which has helped reduce selling pressure. The amount of Bitcoin these traders hold has decreased, especially after significant sell-offs, creating opportunities for accumulation and potentially signaling a price floor. As these short-term holders sell, their coins often transfer to stronger hands, contributing to greater market stability.
BTC/USD rose during the Asian trading session. Today, two releases will likely trigger additional volatility in all USD-related pairs: the Producer Price Index data at 12:30 p.m. UTC and the US UoM Consumer Sentiment report at 2:00 p.m. UTC. Higher-than-expected figures should exert bearish pressure on the pair, while lower-than-expected results may encourage BTC/USD bulls.