Gold Struggles to Maintain Gains Amid Positive US Economic Data
The gold (XAU) price initially rose towards $2,470 but failed to break above it as the US Retail Sales report showed that consumer spending rose unexpectedly in July.
Also, yesterday's data showed that US jobless claims dropped to a one-month low last week, suggesting that the slowdown in the labour market isn't getting out of control.
Overall, Thursday's reports decreased the chances of aggressive rate cuts by the Federal Reserve (Fed) in the coming month. According to the CME Fedwatch Tool, the market is currently pricing in less than a 30% chance of a 50-basis-point (bps) rate cut at the next policy meeting.
"Retail sales being so positive shows the economy is strong, and that has kind of turned the markets, and the dollar is regaining some of its strength and gold's losing some of its lustre", said Chris Gaffney, president of World Markets at EverBank.
Also, two Fed officials changed their previous outlook on lowering interest rates and indicated a possible rate cut at the central bank's next meeting.
Overall, it seems obvious that slightly better-than-expected economic results will not prevent the Fed from reducing borrowing costs in September.
The Fed's dovish stance should support gold prices. In addition, global financial markets brace for potential turbulence and may temporarily flock to the safety of gold as the US presidential elections approach.
"The political uncertainties will continue to be positive for gold prices, but they'll also add to the volatility", said Jeffrey Christian, managing partner of CPM Group.
XAU/USD was essentially unchanged during the Asian and early European trading sessions. Today, traders will focus on another set of US economic reports: Building Permits at 12:30 p.m. UTC and Consumer Sentiment at 2:00 p.m. UTC.
Lower-than-expected results may trigger a minor bullish reaction in XAU/USD. However, if the reports indicate strong growth in the real estate sector and solid consumer confidence, the gold price may drop sharply.
Euro Slips on Strong US Retail Sales Report
On Thursday, EUR/USD was under bearish pressure due to a strong US Retail Sales report. The pair retested the 1.09500 support level and lost 0.37%.
The Commerce Department reported that retail sales increased by 1% in the last month, exceeding forecasts for a 0.3% increase. Moreover, only 227,000 Americans applied for unemployment benefits in the previous week, less than the expected 235,000.
Strong US retail sales figures and low weekly jobless claims were a positive development for the US dollar (USD) following a favourable inflation report earlier in the week. The US data supported expectations of imminent rate cuts by the Federal Reserve (Fed) but at a more gradual pace.
Traders are convinced that the Federal Reserve (Fed) will lower interest rates at the September meeting, but there is no agreement on the magnitude of the rate cut. Currently, the chances of a 50-basis-point (bps) reduction stand at 25%, down from 36% one day earlier, as reported by the CME Group (NASDAQ:CME) FedWatch Tool.
"The overall data suggests that disinflation continues and the Fed is likely to lower rates by 25 basis points in September", said David Chao, global market strategist at Invesco for Asia-Pacific excluding Japan. "However, I do believe that the recent inflation report for July reduces the likelihood of a significant reduction, although this was not initially anticipated", he added.
EUR/USD rose by 0.12% during the Asian and early European trading sessions. Today at 2:00 p.m. UTC, preliminary data from the Michigan Consumer Sentiment survey will be released. Soft data could push the price toward the 1.10000 resistance level, whereas stronger-than-expected numbers could trigger another attempt by EUR/USD to test the 1.09500 support level.
Bitcoin Declines by 2% on Strong US Data
Bitcoin (BTC) lost 2% on Thursday following higher-than-expected US retail sales figures.
Monthly retail sales in the US increased by 1% in July, driven by strong consumer spending and significantly surpassing market expectations of 0.3%. Additionally, new unemployment claims unexpectedly declined for the second consecutive week, easing concerns about the labour market.
Meanwhile, the US dollar (USD) stayed under pressure due to weaker-than-expected US inflation data for July. Markets are still confident that the Federal Reserve (Fed) will begin cutting interest rates in September, though there is uncertainty about whether the cut will be 25 or 50 basis points (bps).
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BTC/USD moved sideways during the Asian trading session. Investors now focus on the forthcoming US Michigan Consumer Sentiment report, due at 2:00 p.m. UTC.
If the figures are below expectations, it could positively influence BTC/USD, potentially driving its price towards $60,000. Conversely, numbers exceeding the forecast might bring BTC/USD down.
Trading Bitcoin on the weekend offers several advantages. Firstly, since the crypto market operates independently of traditional markets, the US stock market is closed and won't influence Bitcoin's price movements, presenting unique opportunities.
Additionally, the market experiences less volatility with fewer economic events and news releases, making it easier for traders to focus on price action and technical analysis.
This combination of factors gives traders a distinct environment to strategise and potentially capitalise on weekend market dynamics.