Gold Jumps as the US Dollar Weakens Due to Slowing US Economy
The gold (XAU) price rose by more than 1% on Thursday as the US dollar (USD) weakened after weaker-than-expected core durable goods orders and housing data.
Yesterday's US macroeconomic statistics underscored the slowing of the economy. Specifically, yesterday's final Gross Domestic Product data revealed a significant decrease in the US economic growth in Q1. Additionally, business spending on equipment fell in May, while a decline in exports widened the trade deficit in goods. As a result, the probability of two rate cuts from the Federal Reserve (Fed) in 2024 increased, pushing the US dollar down and making gold more attractive for holders of other currencies.
Moreover, investors were anticipating the debate between two US presidential candidates. The market also closely monitored any signs that the Japanese government might step in to support the Japanese yen, which remained near its lowest level in 38 years. This uncertainty boosted the demand for gold, a traditional safe-haven asset during economic and political turmoil.
XAU/USD was falling during the Asian and early European trading session as traders focused on the key US inflation data, which is due later today. The US Bureau of Economic Analysis will release its Personal Consumption Expenditure (PCE) Price Index at 12:30 p.m. UTC. The data is the Fed's preferred measure of inflation, and the report will likely have a major impact on investors' interest rate expectations. If PCE figures are higher than expected, XAU/USD will almost certainly drop, possibly below 2,290. Conversely, lower-than-expected numbers may extend the short-term bullish trend in gold.
"Spot gold may retest support at $2,299 per ounce, as the bounce triggered by this barrier is considered random", said Reuters analyst Wang Tao.
The Euro Rises on a Weaker US Dollar, but French Elections Produce Uncertainty
The euro (EUR) gained 0.22% against the US dollar (USD) on Thursday but failed to hold above the important 1.07150 level.
Soft economic data from the US sparked a sell-off in the US dollar yesterday, as investors continue to believe that the Federal Reserve (Fed) will deliver two rate cuts in 2024. Meanwhile, the European Central Bank (ECB) is also expected to provide two 25-basis-point (bps) rate cuts this year, but the market is confident that the ECB should generally remain more dovish than the Fed. Germany reported yesterday that its import prices dropped by 0.4% in May, while the market anticipated only a 0.3% decline. The euro faces additional pressure from political instability as France gears up for a snap election this weekend. France is already subject to E.U. disciplinary measures due to its budget deficit. Now, the fact that far-right nationalist parties are leading the polls has further exacerbated concerns about France's fiscal sustainability.
EUR/USD was falling during the Asian and early European trading session as traders started to reposition ahead of today's US Personal Consumption Expenditure (PCE) Price Index report, due at 12:30 p.m. UTC. It is the Fed's preferred measure of inflation and will likely have a major impact on investors' interest rate expectations. If the figures are higher than expected, EUR/USD will likely drop, possibly below the 1.06600 level. Otherwise, the pair may rise above 1.07200.
Bitcoin Surged on Trump-Biden Debate
Bitcoin (BTC) rose overnight by more than 1% as the market favored Trump in a debate with Biden.
Bitcoin was trading near 61,485 before the debate between two presidential candidates began but quickly surged towards 62,157 as Donald Trump and Joe Biden responded to questions from CNN moderators. Although not directly mentioned in the debate, cryptocurrency has become a significant point of interest in the election confrontation. On 16 June, Trump stated he would end Biden's 'war on crypto' if he is elected. In March, Trump made a post expressing his intention to make the US a global leader in crypto technology and criticized Biden, saying the current President would see crypto 'die a slow and painful death'.
However, President Biden recently vetoed a resolution that would have repealed a Securities and Exchange Commission (SEC) accounting guideline preventing banks from holding crypto assets on their balance sheets. Notably, the resolution passed through both the House and the Senate with majority support. Biden explained his decision, saying he refused to pass legislation that would 'jeopardize the well-being of consumers and investors'.
After the debates, BTC/USD slowly returned towards 61,485 in the Asian and early European trading sessions. Today, traders should focus on the release of the US Personal Consumption Expenditures (PCE) Price Index at 12:30 p.m. UTC. In theory, lower-than-expected figures should positively impact BTC/USD, potentially pushing the price above 62,000. However, the bearish trend in the pair may continue if the figures are better than expected.