Gold Price Regains Traction, EUR/USD Stabilizes Ahead of PCE Price Index Data - TraderFactor (2024)

Gold price struggles to gather a directional move, fluctuating in a tight channel above $2,030 on Thursday. The benchmark 10-year US Treasury bond yield is attempting to recover gains near 3.9% ahead of US data, but this doesn’t seem to provide traction to XAU/USD.

XAUUSD Daily Chart

Gold Price Regains Traction

On Thursday, the Gold price (XAU/USD) regains positive traction and reverses a significant portion of the previous day’s downfall. This is largely due to the underlying bearish sentiment surrounding the US Dollar (USD). Growing acceptance that the Federal Reserve (Fed) will pivot away from its hawkish stance and start cutting interest rates as early as March 2024 has dragged the US Treasury bond yields to a multi-month low. This situation benefits the US Dollar-denominated commodity.

Global Rate-Cutting Cycle

The prospect of a global rate-cutting cycle suggests that the path of least resistance for the non-yielding Gold price remains to the upside. The median forecast in Federal Open Market Committee (FOMC) members’ Summary of Economic Projections has the federal-funds rate ending 2024 at 4.6%, signalling three 25 basis points (bps) rate cuts.

Impact of Inflation Data and Interest Rate Cuts

Softer-than-expected inflation data from the Eurozone, along with the softening in rhetoric from several European Central Bank (ECB) members, suggest that the risk has now shifted towards earlier rate cuts. However, Fed and ECB officials have been pushing back against market bets for rapid interest rate cuts next year, holding back bulls from placing aggressive bets around the Gold price. Traders also prefer to wait on the sidelines ahead of key US data releases.

Key Data Risk and USD Demand

In the run-up to the key data risk, traders on Thursday will take cues from the US economic docket – featuring the final Q3 GDP print, the usual Initial Weekly Jobless Claims and the Philly Fed Manufacturing Index. This, along with the US bond yields, will drive the USD demand and provide some impetus to the Gold price later during the early North American session.

EUR/USD Stabilization

EUR/USD stabilized after recovering toward 1.0950 early Thursday, bouncing back from the intraday low at 1.0929 incurred in the previous session. The US economic docket will feature weekly Initial Jobless Claims and final revisions to Q3 GDP.

Wall Street’s Impact and US Economy Forecast

In the late American session, Wall Street’s main indexes turned south, reflecting a negative shift in risk mood. Early Thursday, US stock index futures trade in positive territory, pointing to an improving market mood. The US Bureau of Economic Analysis will release the final revision to third-quarter (GDP). The US economy is forecast to expand at an annual rate of 5.2%. A downward revision could weigh on the USD with the immediate reaction.

GBP/USD: A Focus on US GDP Data

The GBP/USD pair maintains its position below 1.2650, focusing on US GDP data. After a sharp decline prompted by soft UK inflation data on Wednesday, the pair seems to have stabilized below 1.2650 on Thursday. The revisions to the US’ third-quarter GDP will be closely watched later in the day.

Impact of Soft UK Inflation Data on GBP/USD

GBP/USD stabilized near 1.2650 early Thursday after losing nearly 100 pips on Wednesday. Despite a near-term technical outlook suggesting a loss of bearish momentum, the pair may struggle to rise steadily following the soft inflation readings from the UK.

Market Position Shifts Towards Earlier BoE Policy Pivot

Market positioning has shifted towards an earlier Bank of England (BoE) policy pivot following the UK Consumer Price Index (CPI) readings for November, which came in below analysts’ forecasts on Wednesday. Goldman Sachs now predicts that the BoE will opt for a 25 basis points rate cut in May, compared to their previous forecast of June.

USD Struggles Amid Improving Risk Mood

The US Dollar (USD) is struggling to find demand early Thursday, helping GBP/USD maintain its position. US stock index futures were last seen rising between 0.4% and 0.6%, reflecting an improving risk mood. If Wall Street’s main indexes open higher and gather bullish momentum in the second half of the day, the USD could continue to weaken against its peers.

Potential Impact of US Economic Docket

The US economic docket will feature the final revision to the third-quarter Gross Domestic Product growth alongside the weekly Initial Jobless Claims. If the number of first-time applications for unemployment benefits rises at a stronger pace than anticipated, the USD could come under pressure. Conversely, a reading at or below 200K could provide a boost to the USD, potentially triggering another downward shift in GBP/USD.

GBPUSD Daily Chart

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