US dollar unsteady as gold gains ground amid Fed caution
US Dollar wobbles as gold rises. Fed's cautious stance and economic signals guide the currency's uncertain path ahead.
The US dollar kicked off the week on a shaky note, with the DXY heading towards testing last week's low of 103.17. A breach of this level might lead to a further dip into the 102 territory.
During Monday's Asian session, spot gold made strides, reaching a peak of $2,018.32. As of 08:45 GMT, gold was holding at $2,012.94.
The dollar's vulnerability, coupled with growing speculations that the Federal Reserve is putting the brakes on interest rate hikes, is proving advantageous for the precious metal. The yellow metal is also finding support as signs of economic downturns worldwide prompt investors to seek safe havens.
Recent consumer spending and inflation figures have bolstered expectations for an early interest rate cut by the US Federal Reserve, possibly as soon as May next year. This dovish outlook is keeping US Treasury bond yields under pressure, denting the valuations of the greenback. Despite positive US weekly Initial Jobless Claims data, indicating a drop of 24,000 to 209,000 for the week ending Nov. 18, markets persist in pricing in a nearly 50% chance of a May Fed rate cut.
Even the November meeting's Minutes failed to rally support for the US Dollar. The Minutes revealed a willingness to tighten monetary policy further if progress toward the Committee's inflation objective fell short. However, these hawkish comments failed to trigger a significant uptick in the dollar's value.
US business activity remained steady in November, according to the preliminary Composite PMI by S&P Global, released on Friday. However, this failed to inject any positivity into the US Dollar.
Post the Thanksgiving holiday, gold traders anticipate a relatively subdued week on the macroeconomic front. The mid-tier New Home Sales data from the United States on Monday and the high-impact US Conference Board (CB) Consumer Confidence data on Tuesday set the tone for the week.
Tuesday will also see Fed policymakers in the limelight, with their remarks closely watched for insights into the market's expectations regarding Fed interest rates.
Wednesday brings the second estimate of the United States' third-quarter Gross Domestic Product (GDP) release along with some minor data releases. Attention will be on the US Personal Consumption Expenditures (PCE) Price Index and weekly Jobless Claims data, which could significantly shape the Fed's interest rate outlook.
Additionally, the US Pending Home Sales data will be closely monitored. As the week concludes, market participants prepare for Fed Chair Jerome Powell's appearance in a fireside chat titled "Navigating Pathways to Economic Mobility" at Spelman College in Atlanta. This will be Powell's final speech before the December Fed policy announcements as the Fed enters its "blackout period" on December 2.
Before Powell's speech, the final manufacturing PMI data the US will be reported, followed by the ISM Manufacturing PMI.
