Gold Consolidates Above 2,300 Ahead of Today's Critical US NFP Report
The gold (XAU) moved in a bearish trend on Thursday, cooling after the rally caused by Federal Reserve (Fed) comments. The price found support near 2,300 and now holds steady, waiting for the US nonfarm payroll data that could influence the US interest rate path.
The Fed maintained interest rates unchanged on Wednesday, confirming their plans for future rate cuts but expressing concern over recent disappointing inflation data that may delay rate reductions. The Fed's preferred inflation measure—the Personal Consumption Expenditures Price Index—accelerated and increased at an annualized rate of 2.7% in March.
"Given the sticky inflationary environment and the relative strength of the dollar, we've seen some pressure on the gold market over the last couple of weeks," said David Meger, director of alternative investments at High Ridge Futures.
"We believe this pullback has not yet run its course," he added.
Additionally, Thursday's US Jobless Claims report showed that the number of Americans applying for unemployment benefits remained low last week. The data indicates a persistently strong labor market that will likely support economic growth in Q2. The market now focuses on today's US Nonfarm Payroll report.
"An extremely strong jobs number could further scale back the outlook for rate cuts," Meger said.
Also, the latest geopolitical factors push gold prices higher.
"The big decline over the last two weeks was due to fading concerns of geopolitical risks and hawkish repricing in rates markets," said OCBC FX Strategist Christopher Wong.
An attempt by Egypt to restart stalled negotiations between Israel and Hamas has raised hopes that a ceasefire agreement may soon be reached.
XAU/USD is moving sideways in the 2,300–2,308 range during the Asian and early European trading sessions. The market is waiting for the US Nonfarm Payroll report today at 12:30 p.m. UTC. Higher-than-expected data may bring XAU/USD down, while lower data may support the pair.
Euro Rises Ahead of Today's NFP Report
The euro (EUR) gained 0.15% as the US dollar continued to weaken due to Wednesday's dovish message from Federal Reserve (Fed) officials.
The US Dollar Index (DXY) didn't correct upwards even though US Jobless Claims figures were lower than expected, while nonfarm productivity and unit labor costs increased. On the contrary, the market has now turned more optimistic about monetary policy easing this year because the Fed didn't adopt a more hawkish tone that included the potential for further rate hikes, as some analysts had speculated. According to interest rate swap market data, traders are now pricing in an almost 80% probability of a 25-basis-point (bps) rate cut in September.
At the same time, the European Central Bank (ECB) continues to deliver dovish messages. Yannis Stournaras, Governor of the Bank of Greece and a member of the ECB Governing Council said earlier today that three rate cuts in 2024 were 'probable'. Thus, the latest EUR/USD strengthening seems to be due to dovish US interest rate expectations rather than the result of the eurozone's monetary policy. Fundamentally, the divergence in monetary policies between the US and the eurozone continues to favor the US dollar.
EUR/USD was rising slightly during the Asian and early European trading sessions. Today, the US Nonfarm Payroll (NFP) report at 12:30 p.m. UTC may cause enormous volatility in the Forex market and could drive further moves in EUR/USD. The market expects the report to show that employers added 243,000 jobs in April. A higher-than-expected figure will likely have a bullish impact on the US dollar, while a smaller-than-expected figure will have the opposite effect. However, the report will also contain important details on wages and unemployment, so traders should also pay attention to these indicators. In addition, the ISM Services Purchasing Managers' Index (PMI) report, due at 2:00 p.m. UTC, might trigger more volatility in all USD pairs. Technically, the resistance level of 1.07700 and the support level of 1.06950 are key to watch.
Bitcoin Plunges Amidst Legal Struggles and ETFs' Outflows
Bitcoin (BTC) rose slightly yesterday even though US spot bitcoin exchange-traded funds (ETFs) recorded their largest net daily outflows on Wednesday.
On Wednesday, US spot bitcoin ETFs experienced the largest daily net outflow of $563.7 million, as reported by SosoValue. Fidelity's FBTC had the most significant outflows, with $191 million exiting the fund, while Grayscale's GBTC lost $167.3 million. Moreover, BlackRock (NYSE:BLK) IBIT and Bitwise BITB had outflows of $36.9 million and $29 million, respectively. Notably, this was the first time BlackRock's spot bitcoin ETF registered a net daily outflow.
The cryptocurrency market experienced some legal developments this week. The crypto community was shocked by the arrest of Roger Ver, known as 'Bitcoin Jesus', who was accused of tax evasion and fraud. Meanwhile, former Binance CEO Changpeng Zhao, also known as CZ, received a four-month prison sentence for violating US anti-money laundering laws. These developments highlight the growing government focus on cryptocurrency regulation. With prominent figures facing legal repercussions, the industry is likely to face increased scrutiny and potential shifts in how exchanges and individuals operate. These events have led to a downward correction of over 10% in BTC/USD.
BTC/USD tested 60,000 during the Asian trading session and is now correcting downwards. Former BitMEX CEO Arthur Hayes thinks Bitcoin has reached a temporary low and expects BTC/USD to recover gradually. Bitcoin dipped to a local low of 58,600 earlier this week, but he believes it will rise above 60,000 and then stabilise in the 60,000–70,000 range until August. He argues that the crypto markets will gradually recover following the recent sell-off, fueled by increased US dollar liquidity due to the Federal Reserve's tapering of quantitative tightening (QT) and the US Treasury's debt issuance plans. He interprets these actions as 'stealth money printing', which is beneficial for high-risk assets like cryptocurrencies.