Gold stabilizes at three-week low ahead of US CPI

Markets consolidate previous moves ahead of US inflation

Early Thursday, trading sentiment remains delicate as traders look for further clues to support the hawkish outlook on the US Federal Reserve (Fed). The market's inactivity is compounded by mixed signals from the Middle East and lingering uncertainties regarding China.

That said, Wednesday’s release of the Federal Open Market Committee (FOMC) meeting minutes didn’t provide new insights into the US central bank's future moves, except for confirming strong support for the 0.50% rate cut from September. Additionally, Federal Reserve Bank of Boston President Susan Collins and San Francisco Fed President Mary Daly also crossed wires the previous day but failed to offer any major signals for the policy hawks. However, Dallas Fed President Lorie Logan's hawkish remarks and ongoing concerns about the Middle East and China helped boost the US Dollar Index (DXY) to its highest level in eight weeks.

US Dollar grinds higher, major currencies lick wounds

Given the fresh anxiety about the Fed, the US Dollar Index (DXY) seesaws at the multi-day high, which in turn allows other major currencies to stall the previous downside.

Among them, EURUSD gains major attention as it dribbles at the lowest level since early August amid a broadly firmer US Dollar and fresh doubts about the Eurozone’s economic performance. Additionally, multiple policymakers from the European Central Bank (ECB) back the further rate cuts from the region’s central bank and drown the major currency pair.

GBPUSD also dribbles at a four-week low as traders appear undecided about the UK’s economic sturdiness and the Bank of England’s (BoE) ability to defend the higher rates.

Furthermore, USDJPY bulls take a breather at the highest level in 10 weeks as traders cast doubts about the Bank of Japan’s (BoJ) rate hikes, as well as the Fed’s heavy rate cuts, during the rest of 2024. It should be noted that the latest statistics from the Asian major appear mostly mixed and the incoming Prime Minister (PM) also retreated from previously open support for rate hikes.

Antipodeans stay pressured

Apart from the pre-data consolidation, a risk-on sentiment in the market also keeps the US Dollar’s movements subdued ahead of the inflation data. However, optimism about potential fiscal and monetary stimulus from China, expected during Saturday's announcements from China's Finance Ministry, lifted sentiment in the Asia-Pacific region, which in turn challenges the previous falls of the Antipodeans.

This China-driven optimism allowed AUDUSD to break a five-day losing streak, despite softer-than-expected Consumer Inflation Expectations for October. Similarly, NZDUSD is stabilizing after a sharp decline due to the RBNZ's significant rate cut, even without major domestic data. Additionally, USDCAD pulls back from a two-month high, influenced by a rebound in crude oil prices, Canada’s key export.

Commodities lack recovery momentum

The market’s consolidation challenges sellers of Gold and Crude Oil but fails to inspire the bulls amid looming fears from China, one of the world’s biggest commodity users. Additionally, OPEC+ readiness for output increase and a stalemate in the Israel-Iran war seem to test the Oil buyers of late.

Gold prints the first daily gains in seven as traders lick their wounds at the lowest price level in three weeks amid the US Dollar’s inaction. However, China's five-month pause in adding gold to its reserves, coupled with economic worries about the nation and the US Dollar's corrective bounce, contributes to the precious metal's retreat from its all-time high.

Cryptocurrencies stay on course for weekly loss

Despite a corrective bounce early Thursday, Bitcoin (BTCUSD) and Ethereum (ETHUSD) are still heading toward weekly losses. This trend is driven by a potential supply overhang and the US government's tough stance against various crypto companies and individuals.

Latest moves of key assets

• WTI Crude oil snaps a two-day losing streak while posting mild gains near $73.60 by the press time.
• Gold prints the first daily gains in seven around $2,615 at the latest.
• The USD Index seesaws around 102.90 after rising to an eight-week high the previous day.
• Wall Street closed with mild gains and allow the Asia-Pacific shares to edge higher. Further, European and British equities also pick up despite lacking momentum of late.
• BTCUSD and ETHUSD both print mild gains to pare weekly losses around $61,000 and $2,400 respectively.

Consumer-centric details in the spotlight

After the mixed signals from the Fed Minutes and the US Dollar's continued rise, traders are turning their attention to Thursday's US Consumer Price Index (CPI) for September. Following this, Friday will bring important readings, including the University of Michigan’s Consumer Sentiment Index (CSI), Consumer Inflation Expectations, and the Producer Price Index (PPI).

The recent hawkish bias from the Fed, supported by a strong US jobs report, could be reinforced by positive inflation data, potentially boosting the US Dollar. A stronger Greenback may lead to a necessary reset in Gold, USDJPY, GBPUSD, and EURUSD prices. However, other major currencies and commodities might struggle unless faced with extreme outcomes.

Expectations for the US CPI suggest a decrease to 2.3% YoY and 0.1% MoM for September, down from 2.5% and 0.2%, respectively. The UoM CSI for October is anticipated to improve from 70.1 to 70.8, while the PPI may ease by 0.1% YoY and MoM.

In addition to US data, the economic calendar also features the BoE Monetary Policy Report Hearings, a UK data dump, and Canada's monthly employment report. While the UK data is unlikely to significantly boost GBPUSD, strong Canadian jobs data could lead to a pullback in USDCAD, especially with recent improvements in oil prices.

Predictions for Key Assets

• Recovery Expected: USDCAD, USDJPY, US Dollar, Silver
• Further Downside Likely: AUDUSD, NZDUSD, GBPUSD
• Mostly Sideways Expectations: BTCUSD, ETHUSD, Nasdaq, Gold, DJI30, USDCNH
• Slow & Gradual Fall Expected: DAX, FTSE 100, EURUSD, Crude Oil

May the trading luck be with you!