Gold Rises on Weak US ISM Manufacturing Data
XAU/USD gained 1% on Monday due to the weaker-than-expected US ISM Manufacturing Purchasing Managers' Index (PMI) report.
Gold prices reached 2,350 on Monday, buoyed by growing expectations of eased monetary policies by major central banks. Data released on Monday showed that US manufacturing activity slowed for a second consecutive month in May, while construction spending unexpectedly fell in April due to decreased non-residential activity. These factors have heightened speculation that the Fed may have room to cut rates this year. According to the CME FedWatch tool, traders are currently pricing in a 60% probability of a rate cut in September.
Weak data has fuelled speculation that the Fed might implement multiple rate cuts this year, enhancing the appeal of XAU/USD. Additionally, the European Central Bank (ECB) is expected to lower interest rates this week, initiating a loosening cycle. Moreover, the market believes the Bank of Canada may cut its interest rate this week, and the People's Bank of China is also set to ease financial conditions by the end of Q3.
XAU/USD consolidated within the 2,345–2,350 range during the Asian and early European trading sessions. Today, traders should pay attention to the US JOLTs Job Openings report at 2:00 p.m. UTC. The data will provide insights into the current state of the labour market, potentially influencing investors' interest rate expectations, which could affect gold prices. If the data exceed expectations, the chance of a rate cut by the Fed in autumn may decrease. This will likely lead to a decrease in XAU/USD, possibly below 2,330. Otherwise, weaker-than-expected numbers could push XAU/USD higher, possibly towards 2,360.
Market Awaits the ECB Meeting to Understand Further Euro Trend
Yesterday, EUR/USD rose by 0.52% towards 1.09000. The price has left the consolidation zone of 1.08000–1.08800, where the pair had been moving since mid-May.
The US Dollar Index (DXY) dropped to 104.000, reaching a one-month low after the release of weaker-than-expected ISM Manufacturing Purchasing Managers' Index (PMI) data, which fell to 48.7. The Nonfarm Payroll (NFP) data will be released on Friday and may significantly impact the future direction of US monetary policy. Additionally, the JOLTS Job Openings report today at 12:30 p.m. UTC could affect the US dollar, as the numbers are expected to decline to a three-year low. US data has been mixed lately, and the market is uncertain whether weaker-than-expected economic indicators will prompt the Federal Reserve (Fed) to cut interest rates. Surprises at the next Fed meeting next week are unlikely, but the updates will definitely affect expectations for the US interest rate path this year.
Meanwhile, the European Central Bank (ECB) monetary policy meeting will take place this Thursday at 12:15 p.m. UTC. The market firmly believes the regulator will deliver a rate cut at the meeting. However, the outlook on eurozone interest rates is unclear. Investors are preparing for a hawkish scenario, where the ECB will have to pause cutting interest rates for some time. Inflation is rising, preventing more immediate rate cuts. Thus, it will be important to watch the ECB press conference, as officials could provide more insights into their plans for the interest rate path this year.
The future EUR/USD trend may become clearer today after the publication of German unemployment data for May at 7:55 a.m. UTC and the US JOLTS Job Openings report at 12:30 p.m. UTC. If the data favours the euro, EUR/USD may reach a new high of 1.09600 and rise further towards 1.09800. However, if inflation slows while JOLTS numbers are better than expected, the pair may fall towards 1.08400 and could decline further.
AUD Rises as US Dollar Weakens Due to Soft Manufacturing PMI Data
The Australian dollar (AUD) rose by 0.67% on Monday as the US dollar weakened after the lower-than-expected ISM Manufacturing Purchasing Managers' Index (PMI) figures.
The ISM Manufacturing PMI unexpectedly fell to 48.7 in May, below the forecasted 49.6 and down from 49.2 in April. This marks the second consecutive month of contraction for the US manufacturing sector. The US Dollar Index (DXY) reached 104.000 following the report. Meanwhile, the Australian dollar was hovering near its highest level in two weeks. Investors evaluated mixed Australian economic data, including an unexpected shift to a current account deficit in Q1. Additionally, the Melbourne Institute's Monthly Inflation Gauge increased by 0.3% in May, accelerating for the third consecutive month and reaching its highest level since January. Markets see almost no chance that the Reserve Bank of Australia (RBA) will ease monetary policy this year, with some participants even speculating on another rate hike due to persistent inflation.
According to a Bloomberg report, RBA Assistant Governor Sarah Hunter stated at a conference in Sydney on Thursday that inflationary pressures are the primary concern. 'We're very mindful of that,' she said. Hunter also mentioned that the RBA Board is worried about inflation remaining above the 1–3% target, indicating ongoing inflationary pressure and peaking wage growth.
AUD/USD fell during the Asian and early European trading sessions. Today, the economic calendar is rather uneventful, so volatility is expected to be normal. However, the release of the US JOLTS Job Openings report might trigger a sharp move in the DXY and affect all USD pairs, including AUD/USD. Although the JOLTS Job Openings is a lagging indicator and is much less important than Friday's Nonfarm Payroll (NFP) report, it might still provide some clues about the state of the US labour market. Higher-than-expected figures support the US dollar, while weak results may push AUD/USD slightly higher. Investors are also awaiting Australia's Q1 Gross Domestic Product numbers later this week for further insights into the economy and monetary policy direction.