- Full pricing for US rate cut this month
- Markets await important US labor data
The dollar fell in European trade against a basket of major rivals away from two-week highs touched earlier in Asian trade, and on track for the first loss in four days on profit-taking.
Markets are fully pricing in a Fed rate cut in September, while waiting for important US payrolls data later this week to gauge the pace of policy easing by the Fed this year.
The Index
The dollar index fell 0.2% today to 101.57, after hitting August 20 highs at 101.80.
The index closed Friday up 0.4%, the third profit in a row as US treasury yields muscled up.
However, the index fell 2.2% in August, the heaviest loss since November 2023.
In recent speeches, Fed Chair Jerome Powell strongly opened the door for policy easing and rate cuts in September.
US Rates
According to the Fedwatch tool, the odds of a 0.25% Fed rate cut in September stood at 69%, and at 31% for a 0.5% rate cut.
Now traders await the all important US payrolls report on Friday to gain a clearer picture about US monetary policies.
- Gold holds above two-week low
- Markets await important US labor data
Gold prices rose in European trade on Monday above two-week lows, hovering around $2500 as the dollar loses ground against major rivals.
Later this week, important US labor data will be released and could provide crucial clues to the path ahead for US interest rates.
Prices
Gold prices rose 0.4% today to $2503 an ounce, after marking August 23 lows at $2490.
On Friday, gold lost 0.7%, the second loss in three sessions as both the dollar and US treasury yields bounced.
Across August, gold rose 2.25%, the seventh monthly profit in a row and the longest such streak of monthly profits since the launch of instant trading on gold in July 1997.
The gains were boosted by the decline in the dollar and US treasury yields, as Fed Chair Jerome Powell strongly opened the door for policy easing and rate cuts in September.
Gold was also boosted by haven demand as geopolitical tensions mounted, while actual demand improved as well in China and India, the biggest gold consumers in the world.
The Dollar
The dollar index fell 0.2% on Monday away from two-week highs at 101.80 against a basket of major rivals, in turn boosting gold and other greenback-denominated gold futures.
US Rates
According to the Fedwatch tool, the odds of a 0.25% Fed rate cut in September stood at 69%, and at 31% for a 0.5% rate cut.
Now traders await the all important US payrolls report on Friday to gain a clearer picture about US monetary policies.
SPDR
Gold holdings at the SPDR Gold Trust rose 5.47 tonnes on Friday to a total of 862.74 tonnes, the highest since January 16.
- Inflationary pressures on ECB policymakers recede
- Markets await strong evidence on US rate cuts
Euro rose in European trade on Monday against a basket of main rivals, holding its ground above two-week lows against the dollar and about to mark the first profit in four days as it trades above the psychological barrier of $1.1.
Earlier eurozone consumer prices data showed price pressures were receding, in turn boosting the odds of an ECB rate cut in September.
The Federal Reserve is also fully expected to cut interest rates later this month, with traders awaiting the all important US payrolls report on Friday to gauge the likely size of the upcoming US rate cut.
The Price
The EUR/USD pair rose 0.25% today to $1.1070, with August 19 lows at $1.1040.
The pair closed Friday down 0.3%, the third loss in a row after Eurozone inflation data.
The euro however rose 2% against the dollar in August, its largest monthly profit in 2024 on hopes for a reduction in the US-eurozone rate gap.
European Inflation
Official eurozone data on Friday showed inflation slowed down in August, with a 2.2% rise in consumer prices, down from 2.6% in July.
Core prices rose 2.8% as expected, down from 2.9% in July.
European Rates
Following the data, the odds of a 0.25% rate cut by the European Central Bank in September rose from 60% to 80%.
US Rates
According to the Fedwatch tool, the odds of a 0.25% Fed rate cut in September stood at 69%, and at 31% for a 0.5% rate cut.
Now traders await the all important US payrolls report on Friday to gain a clearer picture about US monetary policies.
Rate Gap
The current eurozone-US interest rate gap stands at 125 basis points in favor of the US, and might shrink to 100 basis points if the Fed went ahead with a surprise 0.5% rate cut in September.
Markets await more clues about future of Japanese rates
Higher US yields weigh on the yen
Yen fell in Asian trade on Monday against a basket of major rivals, sharpening losses for the fourth straight session against the dollar and marking two-week lows as markets await more clues about the prospects of a third Japanese rate hike this year.
US 10-year treasury yields continued to rise and widen the gap with Japanese rates, in turn heaping pressure on the yen.
The Price
The USD/JPY pair rose 0.35% to 146.60 yen per dollar, the highest since August 21, with a session-low at 145.83.
The yen lost 0.8% against the dollar on Friday as US yields rallied.
Across August, the yen rallied 2.55% against the dollar, the second monthly profit in a row due to the unwinding of yen carry trades.
Japanese Rates
Traders still believe there's a 70% chance that the Bank of Japan will maintain interest rates unchanged at the October meeting.
However, they’re waiting for more data and remarks by BOJ officials to gather more clues about the future path of policies.
US Yields
US 10-year treasury yields hit two-week highs at 3.928% as the odds of a 0.5% rate cut in September by the Federal Reserve receded.
According to the Fedwatch tool, the odds of a 0.25% Fed rate cut in September stood at 69%, and at 31% for a 0.5% rate cut.
Now traders await the all important US payrolls report on Friday to gain a clearer picture about US monetary policies.
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