Gold Rises as the US Dollar Weakens After Inflation Report
Gold (XAU) gained 0.87% on Tuesday as the US dollar started to weaken after the U.S. inflation data demonstrated a slowdown, reinforcing beliefs that the U.S. interest rate might have already peaked.
U.S. inflation indicated that U.S. consumer prices didn't change in October, and the year-over-year increase in core inflation numbers was the least significant in two years. The US Dollar Index (DXY) and benchmark US 10-year Treasury yields fell towards their two-month low due to lower-than-expected inflation figures. Thus, the opportunity cost of holding gold decreased. Following Tuesday's data, U.S. interest rate futures indicated a notable shift in market expectations regarding the U.S. interest rate trajectory. The chances of a rate cut by May 2024 jumped from 34% to 65%, according to the CME's FedWatch tool. Thus, anticipations of decreasing U.S. interest rates increase the gold's appeal.
XAU/USD continued to rise during the Asian and early European trading sessions. Today, traders should focus on the U.S. Producer Price Index (PPI) report due at 1:30 p.m. UTC. Higher-than-expected PPI figures may bring the XAU/USD price below 1,955. However, the short-term bullish trend in the pair may continue if the figures are lower than expected.
The British Pound Rose Confidently as U.S. Inflation Slowed
Yesterday, GBP/USD rose by 1.79% after lower-than-expected U.S. Consumer Price Index (CPI) figures.
On Tuesday, the GBP/USD pair strengthened following the mixed employment data from the U.K. and the U.S. CPI reports. Lower-than-expected U.S. inflation numbers caused significant shifts in the global markets, marking some of the most intense movements this year. Contrary to the anticipated 0.1% growth, the U.S. CPI remained unchanged in October. The core inflation rate increased by only 0.2% instead of the expected 0.3% rise. This data sharply contrasted with the forecast, leading to the reassessment of the U.S. rate hike trajectory.
During the early European trading session, GBP/USD declined following the release of lower-than-anticipated U.K. CPI numbers. Today's key event is the U.S. Producer Price Index (PPI) report due at 1:30 p.m. UTC. If the PPI figures exceed the forecast, GBP/USD could fall below 1.24500. Meanwhile, lower-than-expected PPI figures could support the short-term upward trend in GBP/USD.