Gold Slows Down as Traders Closely Monitor the US Reports
Gold (XAU/USD) showed the first signs of slowing down on Thursday, as the recent US reports were better than expected.
The US Gross Domestic Product (GDP) growth report showed a growth of 3% annually for Q2. Jobless claims unexpectedly decreased, and durable goods orders were higher than expected. Although this data is supposed to question the possibility of future aggressive rate cuts, the market still awaits another 50-basis-point (bps) reduction in November by the Federal Reserve (Fed). According to the CME FedWatch tool, there is now a 50.2% probability of a large rate decrease.
Another positive factor for gold is that China's central bank unveiled its biggest stimulus this week since the COVID-19 pandemic and is expected to cut its seven-day reverse repo rate. ‘This stimulus is giving industrial metals a boost, and gold won't be an exception’, said Wang Tao, Reuters analyst. Also, the tensions in the Middle East persist, and they usually act in favor of the precious metal.
Gold has been correcting downwards during Asian and early European trading hours. According to Wang Tao:
"Spot gold may retest support at $2,654 per ounce. A break below could open the way towards the $2,633 to $2,641 range."
Market participants will be waiting for the US Personal Consumption Expenditures (PCE) Price Index report, coming out today at 12:30 p.m. UTC. Stronger-than-expected data may further diminish expectations for a large rate cut by the Fed, pushing XAU/USD lower. Otherwise, gold will likely continue rising.
Euro May Face Strong Bearish Pressure
The euro (EUR/USD) lost 0.4% against the US dollar (USD) on Thursday as traders continued to bet on aggressive rate cuts by the Federal Reserve (Fed) despite US macro data indicating a relatively healthy economy.
There appears to be a discrepancy between the actual state of the US economy and the market's monetary policy expectations. Yesterday's reports indicated that corporate profits increased in Q2 more robustly than initially thought, while gross domestic product (GDP) figures grew at an unrevised 3% annual rate. In addition, jobless claims were lower than expected, while new orders for core durable goods unexpectedly rose in August. It now seems difficult to justify additional rate cuts by the Fed, which the market is clearly betting on. If the US data continues to be better than expected, investors will have to adjust their dovish expectations. These changes will pull the US Dollar Index (DXY) higher and push EUR/USD lower.
The bearish case for EUR/USD gets even stronger when considering events in the eurozone. Apart from the struggling German economy, the euro faces risks from political uncertainty stemming from France. Bond investors are uncertain about how long France's new government will last, which is already being reflected in the financial markets. French bonds now pay a higher yield than Spain's for the first time since 2008. If the government fails to close the budget deficit, it may trigger another fiscal crisis and prompt investors to flock away from the euro into safe-haven assets.
EUR/USD was falling slightly during the Asian and early European trading sessions. Today, the US Personal Consumption Expenditure (PCE) Price Index report, the Fed's preferred indicator of inflation, is the most important event. The data will be released at 12:30 p.m. UTC and will likely cause above-normal volatility in all USD pairs. Higher-than-expected figures will almost certainly push EUR/USD below the support 1.11000 level. Conversely, lower-than-expected results may trigger a rally above the 1.12150 mark.
Bitcoin Reached $65,000 on Macroeconomic Trends and Institutional Demand
Bitcoin (BTC) gained 3.14% on Thursday, fueled by an increased risk appetite among investors following the third estimate of US gross domestic product growth for Q2, rising by the annual 3%.
Bitcoin's surge beyond $65,000 is fueled by positive macroeconomic conditions, growing institutional interest, and renewed momentum in the tech sector. Significant inflows into Bitcoin exchange-traded funds (ETFs) indicate a shift in investors' sentiment. Fears of a stock market bubble have diminished as US economic data showed signs of economic growth, coupled with housing prices hitting a record high.
Also, China's newly announced economic stimulus measures triggered the largest weekly surge in the CSI 300 stock index in over a decade, which sparked optimism across many other financial assets, including Bitcoin. However, the most impactful recent event driving Bitcoin's price was a $242 million inflow into spot Bitcoin ETFs over just two days. This changed investors' sentiment, as skepticism had lingered about institutional demand, especially after BlackRock's iShares Bitcoin Trust ETF (NASDAQ:IBIT) saw only $5 million in inflows since its launch on 27 August, according to Farside Investors data.
BTC/USD moved sideways during the Asian trading hours. Today, the US Personal Consumption Expenditures (PCE) Price Index will be released at 12:30 p.m. UTC. Higher-than-expected figures could strengthen the US dollar and push BTC/USD lower as the chances for a 50-basis-point US rate cut in November will decrease. Meanwhile, lower-than-expected data may boost BTC/USD. Overall, this key inflation report will likely increase volatility in the market.