Gold Down Ahead of Important US Reports
Gold continued its downward correction on Monday. The market now awaits the release of US Producer Price Index (PPI) data for April to gain more information about the Federal Reserve's (Fed) future monetary policy decisions.
Even though XAU/USD has declined recently, it's only a small correction after a sharp increase on Thursday last week. According to UBS analyst Giovanni Staunovo, this could be due to some profit-taking before the release of important US inflation data later this week, which will likely affect gold prices. Clear signs of slowing inflation and more economic data would be necessary for gold to continue its upward trend.
The US Producer Price Index (PPI) data is scheduled to be released at 12:30 p.m. UTC today. According to the US Bureau of Labor Statistics, producer prices in the US increased by only 0.2% month-over-month in March 2024, below the forecast of 0.3%, which was the lowest increase in three months. In April, PPI figures are expected to increase by 0.2%. Also, a significant release will be tomorrow's Consumer Price Index (CPI) report at 12:30 p.m. UTC. The Reuters poll of economists predicts that core inflation will increase by 0.3% on a monthly basis in April, down from 0.4% in the previous month. The slowdown should bring the annualised inflation rate down towards 3.6%.
XAU/USD has been rising during Asian and early European trading sessions today. The market is currently awaiting the release of the US PPI data for April. Higher-than-expected numbers will put downward pressure on XAU/USD, while lower-than-anticipated figures may give XAU/USD bullish momentum.
Euro Increases Despite Rising US Inflation Expectations
The euro (EUR) rose by 0.15% on Monday despite a report from the New York Federal Reserve (Fed) showing that short-term and long-term consumer inflation expectations increased in April.
According to a survey from the New York Fed, US consumer inflation expectations for 2024 increased in April. The Consumer Sentiment survey reported that inflation expectations rose from 3% in March towards 3.3% in April. After weaker-than-expected US payrolls and job reports, the market has strengthened its expectations for a rate cut by the regulator. Investors are now predicting two rate cuts by the Fed this year, with the first likely being delivered in September.
Just a month ago, concerns over the euro's vulnerability led to predictions that it would reach parity with the US dollar. These concerns have eased slightly due to signs of economic recovery in the eurozone. Recent Purchasing Managers' Index surveys indicated that business activity in the eurozone outpaced that of the US for the first time in a year, suggesting a more robust economic environment in Europe. The data could support the euro despite ongoing interest rate disparities between the European Central Bank (ECB) and the Fed.
EUR/USD moved sideways during the Asian and early European trading sessions. Today's release of Germany's ZEW Economic Sentiment Index at 9:00 a.m. UTC and the US Producer Price Index (PPI) at 12:30 p.m. UTC could significantly influence EUR/USD. Upbeat ZEW figures may bolster the euro, showing optimism about the state of the largest eurozone economy. Conversely, strong US PPI data could strengthen the US dollar by indicating rising producer prices, which may lower expectations of rate cuts by the Fed. Traders will likely adjust their positions based on these reports, so volatility may increase today and impact the short-term direction of EUR/USD. Key levels to watch are 1.07700 and 1.08050.
Australian Dollar Rises Above 0.650 Ahead of Important Inflation Reports
The Australian dollar (AUD) gained 0.09% in a rather volatile trading session on Monday. The rise happened because the National Australia Bank (NAB) Business Confidence Index aligned with the market expectations, while the US Dollar Index (DXY) lost some ground.
AUD/USD has been in an uptrend since mid-April. The divergence in monetary policy expectations between the US and Australia has helped push the Aussie higher. Indeed, investors continue to believe that the Federal Reserve (Fed) will likely deliver two rate cuts this year, while the Reserve Bank of Australia (RBA) is not expected to ease its monetary policy soon. Michele Bullock, the RBA Governor, explicitly signalled at the last policy meeting that lowering rates isn't on the agenda because of inflation risks. Currently, the RBA doesn't expect national inflation to return to its target until late 2025.
At the same time, high commodity prices and a strong labour market have improved the economic outlook. Yesterday, the Australian Treasury reported that the budget will likely reach a surplus for the second year in a row. Thus, government spending might increase in future, making it more difficult to tame inflation. As a result, the RBA may not cut rates in 2024, potentially exerting upward pressure on AUD/USD.
Today, an important release will be the US Producer Price Index (PPI) report at 12:30 p.m. UTC. The report will likely create some volatility in the market. Still, a big move is unlikely as traders may refrain from opening large orders in AUD ahead of the US Consumer Price Index (CPI) report and Australian Wage Price Index data, which will be published on Wednesday. Still, the PPI report may affect AUD/USD. If figures are lower than expected, the pair may rise above 0.66200. Conversely, AUD/USD may drop below 0.65800 if numbers exceed the forecast.