Gold Is Trading Sideways Ahead of US Reports
On Tuesday, gold (XAU/USD) rose by 0.28% after testing the $2,600 support level. The price moved sideways after a sharp decline on Monday.
Increased investors' interest in safe assets following Donald Trump's recent tariff announcements continues to support gold. The newly elected US president has announced plans to impose tariffs on imports from Canada, Mexico, and China, which will likely impact the dynamics of gold prices. Geopolitical tensions between Russia and Ukraine and concerns about Trump's trade policies continue to drive demand for gold as investors seek safe haven investments amidst uncertainty. This has contributed to the recent increase in gold prices.
Meanwhile, the US Dollar has been consolidating near the lower border of its recent trading range, supporting XAU/USD despite the positive US macroeconomic data released on Tuesday. The data suggests the Federal Reserve may adopt a more restrictive approach towards monetary policy, leading to a decline in gold prices. According to the FedWatch tool provided by CME Group, investors anticipate a 63% probability of a 25-basis-point rate reduction at the next Fed meeting.
During the Asian session today, XAU/USD continued to rise slightly, remaining within the $2,600–$2,650 range.
On Wednesday, the release of the US macroeconomic data will likely affect gold. Personal Consumption Expenditure Price Index will come out at 3:00 p.m. UTC and add volatility to the market. If XAU/USD breaks the upper boundary of the range, it could rise towards $2,680. Conversely, if the price tests the support level at $2,600, it may indicate a downward movement.
Euro Is Under Pressure Due to Strong US Dollar
On Tuesday, the euro (EUR/USD) fluctuated between 1.04260 and 1.05430 against the US dollar but finished the day essentially unchanged.
The US Dollar Index (DXY) remained relatively stable on Tuesday as market participants scrutinized President-elect Donald Trump's tariff pledges and anticipated the release of a crucial US inflation indicator. ‘Markets are likely to remain edgy as a second Trump administration brings back uncertainty about policymaking in the US This uncertainty can lead markets to "sell first and ask questions later", which is a positive for the USD’, said Carol Kong, currency strategist at Commonwealth Bank of Australia.
Although yesterday's US New Home Sales data was weaker than expected, consumer confidence remained elevated in November, additionally boosting the greenback. Furthermore, the latest FOMC minutes showed that the Federal Reserve (Fed) would prefer to go slow on rate cuts due to market volatility and uncertainty. The minutes revealed that Fed officials were split on the extent of future interest rate reductions at their recent meeting. They collectively decided against providing explicit forward guidance on the likely US monetary policy trajectory.
EUR/USD was falling slightly during the Asian and early European trading sessions.
On Wednesday, all USD pairs will likely experience above-normal volatility due to the release of important US macroeconomic reports. The latest Gross Domestic Product (GDP), Jobless Claims, and Durable Goods Orders data will come out at 1:30 p.m. UTC. Then, the US Bureau of Economic Analysis will publish its Personal Consumption Expenditure (PCE) Price Index at 3:00 p.m. UTC.
All reports may impact the EUR/USD exchange rate, but the most significant release is arguably the PCE data. The market expects a 0.3% rise in monthly core PCE Price Index and a 2.8% annual increase. Generally, the market is positioned to see strong figures that should support the recent rally in the DXY. If the figures are higher than expected, EUR/USD may drop only slightly. However, EUR/USD will probably rally sharply on lower-than-expected data.
British Pound Trades Sideways, Awaiting Crucial PCE Data
The British pound (GBP/USD) has been trading sideways within the 1.25000–1.26000 range since the end of last week.
The US dollar (USD) remains stable as investors continue to evaluate President-elect Donald Trump's tariff plans and monitor crucial US inflation figures later today.
On Tuesday, the US dollar initially rose in response to Trump's threat of tariffs against China, Mexico, and Canada, but it reversed as investors awaited further details about the policies. Meanwhile, the FOMC meeting minutes from the November Federal Reserve (Fed) meeting indicated that policymakers were optimistic about deflation and a robust labor market, reinforcing the notion of further interest rate cuts. However, the minutes revealed Fed members preferred a more gradual approach. Currently, markets believe there is a 63% probability that the Fed will once again lower rates by 25 basis points next month.
GBP/USD has been moving sideways during Asian and early European trading sessions. The market participants are waiting for the Gross Domestic Product Growth Rate data, which will be released today at 1:30 p.m. UTC, and the PCE Price Index report, due at 3:00 p.m. UTC. A rise in PCE figures may lead to a rate hike and a rise in the DXY, while the lower-than-expected data favors rates reduction.