Gold Attempts to Rebound After Declining for Two Days
On Tuesday, the gold (XAU) price declined by 0.51% and stabilised around the 2,020 mark following the release of mixed U.S. macroeconomic data.
Yesterday's data indicated that U.S. job openings dropped to their lowest level in over 2.5 years in October, suggesting that the higher interest rates are restraining the labour demand. At the same time, the ISM Services Purchasing Managers' Index (PMI) numbers were higher than expected, indicating that business activity in non-manufacturing industries continues to expand. Two reports paint a mixed picture of the U.S. economy, which is slowing but doing it gradually. Still, the market expects the Federal Reserve (Fed) to deliver its first rate cut in March 2024. According to the CME FedWatch Tool, the probability of the Fed easing its monetary policy in March is now 63%. 'We only expect the (gold) price to rise lastingly to $2,100 per troy ounce in the second half of 2024 when the Fed begins lowering its interest rates,' Commerzbank said in a note.
XAU/USD was increasing in the Asian and early European trading sessions. Attention is now on the U.S. Nonfarm Payroll (NFP) data release on Friday, which could offer further insights into the U.S. interest rate path ahead of next week's Fed policy meeting. Today's ADP Employment report, coming out at 1:15 pm UTC, serves as a proxy for Friday's NFP data. Therefore, traders should pay attention to the release and changes in labour market statistics. If ADP employment figures are higher than expected, XAU/USD may continue moving downward. However, if numbers are lower than expected, the gold price may rise above 2,040. 'Spot gold may bounce into a range of $2,033–$2,039 per ounce, as it has stabilised around a support of $2,009,' said Reuters analyst Wang Tao.
EUR/USD Continues to Fall as the ECB Signals the End of Rate Hikes
The euro (EUR) lost 0.38% on Tuesday after dovish comments from the European Central Bank (ECB) executive board member, Isabel Schnabel, decreased expectations of the eurozone's base rate. Meanwhile, the U.S. data came out mixed and pushed the US dollar higher.
EUR/USD has been in a downtrend for about a week despite the U.S. interest rate expectations being rather dovish. Indeed, while the latest macroeconomic data indicate that the U.S. economy continues to expand, the labour market is slowing down. Weakening labour demand puts downward pressure on prices and supports the view that the Federal Reserve (Fed) has probably finished raising interest rates. 'It just reinforces the narrative that we've been on, which is, Fed hiking is probably done. We're shifting more into when are they going to be easing. I think expectations are still all over the place in terms of that question,' said Brad Bechtel, the global head of FX at Jefferies. At the same time, the European Central Bank (ECB) sentiment also doesn't look hawkish. Isabel Schnabel, a prominent ECB hawk, has changed her tone lately. 'When the facts change, I change my mind. The most recent inflation number has made a further rate increase rather unlikely,' she said.
EUR/USD fell during the Asian session but stabilised in the early European trading hours, attempting to recover losses. However, Germany's industrial orders for October were substantially lower than expected and capped the gains. Overall, the dovish-leaning ECB tone and the sluggish eurozone economy ensure that any recovery in EUR/USD may not come easily. Today, traders should focus on several macroeconomic releases: the Retail Sales report at 10:00 a.m. UTC and the U.S. ADP Employment data at 1:15 p.m. UTC. Two releases may trigger increased volatility. Key EUR/USD levels to watch are 1.07700, 1.08250, and 1.08450.