Gold Stabilises Near 2,020 as the Market Focuses on the US Inflation Data
The gold (XAU) price dropped by 0.44% on Friday, pressured by elevated Treasury yields ahead of the US inflation data this Tuesday. Investors await more clues on the timing of interest rate cuts by the Federal Reserve (Fed).
"The Fed will likely keep rates higher for longer, which means most central banks will probably follow suit. I think that things are trending lower for the gold price. There is a pretty strong floor support at about $1,960 that I don't expect to see gold go below," said Everett Millman, a chief market analyst at Gainesville Coins.
Indeed, the market believes the Fed won't deliver its first rate cut in March, while the probability of a 25 basis point (bps) rate cut in May is just around 54%. Thus, traders generally expect the macroeconomic environment in the US to remain supportive of tight monetary policy. Traders believe the US will continue to perform well, with inflation easing. Therefore, any data release challenging this view will cause a strong market reaction. For example, if January's US Consumer Price Index (CPI) comes out lower than expected tomorrow, XAU/USD will likely rally sharply.
XAU/USD was essentially unchanged during the Asian and early European trading sessions. Thomas Barkin, Richmond Fed president, will give a speech at 5:00 p.m. UTC today. It might impact the price of gold, especially if he clearly indicates the future path of US interest rates. Other than that, the formal macroeconomic calendar is uneventful, so XAU/USD may continue to trade sideways with a minor bearish tilt.
EUR/USD Is Approaching 1.08000 Ahead of Tomorrow's US CPI Data
The euro (EUR) gained 0.06% on Friday after the US Labour Department revised its December inflation data, showing a smaller increase in prices than expected.
The annual revisions published by the US Labour Department on Friday showed that the US Consumer Price Index (CPI) increased slightly less than reported in December. The data triggered a minor sell-off in the US dollar but didn't shift expectations on the timing of interest rate cuts by the Federal Reserve (Fed) this year.
"The revisions were much ado about nothing. This is becoming a trend where a Fed official mentions a data release once, and then everyone waits with bated breath only to find out that it's a bunch of noise," said Brian Jacobsen, a chief economist at Annex Wealth Management.
EUR/USD has been rising for 4 consecutive days now, even as European Central Bank (ECB) officials have started to sound more dovish lately. Fabio Panetta, the ECB Governing Council member, said that the moment was fast approaching for the central bank to cut interest rates. Indeed, the market now expects more rate cuts from the ECB than from the Fed this year. This relative divergence in expectations should put downward pressure on EUR/USD.
EUR/USD continued to rise during the Asian and early European trading sessions. Today's macroeconomic calendar doesn't have important economic releases, so already-established trends may continue. However, traders might prefer to close their active positions before tomorrow's US CPI report. Furthermore, EUR/USD is approaching strong resistance in the 1.08000 area, and some bulls might close their long positions. Thomas Barkin, the Richmond Fed president, will give a speech at 5:00 p.m. UTC today. It might impact the USD exchange rate and related pairs, especially if he clearly indicates the future path of US interest rates.
Bitcoin Reaches a 2-Year High on Strong ETF-Induced Demand
Bitcoin (BTC) consolidated above 48,000 yesterday, ending the week with a 13.50% increase.
At the beginning of February, Bitcoin lacked any significant price movements, demonstrating uncertainty among traders. However, the influx of investments into Spot Bitcoin ETFs increased demand for the asset, and BTC/USD broke above the 48,000 level for the first time since December 2021. Within the initial 20 days of operation, Spot Bitcoin ETFs have rapidly accumulated an impressive $10 billion in assets under management, demonstrating investors' enthusiasm for a new investment approach.
American investment management firm ARK Invest, notably optimistic about Bitcoin, predicts BTC will replace gold as a safe-haven asset. Thus, the cryptocurrency may continue rising as it becomes an important part of financial markets. ARK Invest argues that Bitcoin's resilience to economic shocks, such as interest rate hikes and inflation, positions it favorably in the current economic landscape. The US Securities and Exchange Commission's recent approval of the Bitcoin exchange-traded fund (ETF) is a crucial event for the market. This progress reflects Bitcoin's growing acceptance among institutional investors and suggests a shift in its recognition as a valuable asset.
Today, BTC/USD failed to consolidate above 48,500 in the Asian trading session and dropped to around 48,000. An important event for Bitcoin is the US Consumer Price Index (CPI) report on 13 February at 1:30 p.m. UTC. This event may determine whether BTC/USD can surpass its previous high of 49,000, established on 11 January. Lower-than-expected CPI figures may push BTC/USD higher. However, the short-term bullish trend may reverse if the actual numbers exceed the forecast.