XAU/USD Rebounded Above 2,000 After a Weak US Retail Sales Report
The gold (XAU) price rose towards 2,008 yesterday, rebounding from a short-lived drop. Currently, the price remains above 2,000.
"Gold bulls seized on a surprisingly soft retail sales number to surge back above $2,000," said Tai Wong, a New York-based independent metals analyst.
Yesterday's US retail sales figures indeed surprised the market. Investors and experts had expected the Retail Sales Index for January to stand at 0.2%, while the data showed a decrease of 0.6%. The significant difference between the actual and expected numbers affected the US dollar exchange rate and pushed XAU/USD higher.
The main driver for the gold price in the short term is interest rate expectations. XAU/USD may remain under bearish pressure in the short term until the Fed announces the exact timing of rate cuts, noted Chris Gaffney, president of world markets at EverBank. In other words, gold traders are awaiting any new data from the Fed, and the current XAU/USD fluctuations are just preparation for changes in US monetary policy. However, a single report is unlikely to change investors' interest rate expectations significantly. Thus, market participants pay attention to all US macroeconomic data.
XAU/USD started the Asian session moving sideways. Later today, increased volatility may be caused by several important US reports. The market is waiting for data on the Producer Price Index (PPI) at 1:30 p.m. UTC. Analysts expect the PPI figures for January to be below the projected 0.1%, which could push XAU/USD higher. Conversely, numbers higher than forecast may pull the pair towards 1,980.
"Spot gold may retrace into a range of 1,990–1,996, as it could have completed a bounce from Wednesday's low of 1,984.09," said Reuters analyst Wang Tao.
Worse-Than-Expected Retail Sales Data Pushed the Euro Higher
The euro (EUR) gained 0.59% on Thursday after the US Retail Sales report came out weaker than expected and pulled the US dollar and Treasury yields lower.
EUR/USD rose above the important 1.07500 level yesterday after official data showed that US retail sales fell more than expected in January. However, investors' interest rate expectations didn't change much as other macroeconomic data—specifically, Jobless Claims figures—were better than expected. The market still doesn't expect the Federal Reserve (Fed) to deliver a rate cut this spring. According to the CME FedWatch Tool, the probability that the US central bank will ease its monetary policy in May currently stands at just 38%.
Meanwhile, the European Central Bank (ECB) continues to make dovish remarks. Francois Villeroy de Galhau, the head of the Bank of France and the ECB member, said on Friday that the regulator 'shouldn't hold off the first rate cut for too long.' Indeed, the eurozone's economy continues to struggle, so interest rate cuts may be warranted soon. On Tuesday, an official report revealed that Germany's ZEW Current Economic Conditions Index declined more than expected in February, while the eurozone's Gross Domestic Product figures for Q1 grew by a mere 0.1% in Q4.
EUR/USD was falling during the Asian and early European trading sessions. Today, 2 releases will likely trigger additional volatility in all USD pairs and possibly provoke sharp moves in EUR/USD: the US Producer Price Index at 1:30 p.m. UTC and Consumer Sentiment reports at 3:00 p.m. UTC. Higher-than-expected figures should exert bearish pressure on the pair, while lower-than-expected results may encourage EUR/USD bulls. Currently, the short-term technical bias remains bullish as the pair is moving above the pivotal 1.07500 level.
The Canadian Dollar Rose as the US Dollar Retreated
The Canadian dollar (CAD) gained 0.58% on Thursday as the US retreated following the weaker-than-expected US Retail Sales report.
USD/CAD has been trading in a bullish trend since December 2024, and this trend is now at risk of breaking as the pair tests the critical support level near 1.34500. The recent rise in crude oil prices and strong Canadian employment figures have substantially boosted the Canadian dollar. Fundamentally, investors' interest rate expectations also favor CAD over USD. According to interest rate swap market data, the market currently prices in just 70 basis points (bps) worth of rate cuts by the Bank of Canada (BOC) and more than 90 bps of rate reductions by the Federal Reserve (Fed) in 2024. However, some speculate that the BOC may soon end its quantitative tightening program and increase liquidity in financial markets. In theory, this could exert upward pressure on USD/CAD.
USD/CAD was rising slightly during the Asian and early European trading sessions. Today, traders should focus on 2 US reports: the Producer Price Index at 1:30 p.m. UTC and Consumer Sentiment at 3:00 p.m. UTC. Higher-than-expected figures should boost USD/CAD, while lower-than-expected results should have the opposite effect. Currently, the short-term technical bias remains bearish as USD/CAD is trading below the pivotal 1.35100 level.