Gold prices soared towards a new all-time high on Tuesday following the release of weaker-than-expected US macroeconomic data. The US Consumer Confidence Index dropped significantly in September, indicating a decline in consumer sentiment. This, paired with a Richmond Federal Reserve survey showing weak manufacturing activity, has put pressure on the US dollar, driving it closer to its year-to-date low.
Market analysts are now predicting a high probability of the Federal Reserve cutting interest rates by another 50 basis points at the November meeting. Geopolitical tensions and uncertainty surrounding the upcoming US presidential election are also expected to support the XAU/USD pair.
Despite reaching a high of $2,670, profit-taking by investors caused a slight pullback in gold prices. However, ongoing expectations of aggressive policy easing by the Fed are likely to prevent a significant corrective drop.
Looking ahead, key events to watch include speeches from influential Fed members and the US Personal Consumption Expenditure Price Index, which could impact USD demand and gold movements.
Euro Strengthens as Fed’s Rate Cut Expectations Rise
The Euro saw a 0.61% increase against the US dollar on Tuesday as concerns over the US economy led to expectations of more rate cuts by the Federal Reserve. The Consumer Confidence Index showed a sharp decline in September, boosting the likelihood of a 50-basis-point rate cut in November.
Meanwhile, the European Central Bank is expected to gradually ease its policy, creating a divergence in monetary policy expectations that favors the euro. Market bulls are now eyeing a key resistance level of 1.12200 for EUR/USD.
Today’s economic calendar is relatively quiet, with the US New Home Sales report likely to add some volatility to USD-related pairs.
Japanese Yen Reacts to BOJ’s Monetary Policy Outlook
The Japanese yen experienced a two-week high before closing with a slight decline on Tuesday. The Bank of Japan remains cautious about adjusting its monetary policy, citing external risks such as market volatility and the uncertainty in the US economy.
The yen has benefited from a weaker US dollar, driven by disappointing US economic data. Market participants are now waiting for the BOJ Monetary Policy Meeting Minutes, which could provide more clarity on the bank’s future actions.
Overall, the global financial markets are reacting to changing economic conditions and central bank policies, which could impact various currency pairs and commodities in the coming days. Stay informed and make strategic decisions to navigate through these uncertain times.
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