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- Gold pressured by rebound in US treasury yields
- Markets await strong data on US rate cuts
Gold prices lost some ground in European trade on Tuesday, while still hovering near the psychological barrier of $2500, under pressure from the higher US 10-year treasury yields.
Trading remains limited as investors shun major positions ahead of important US inflation data.
Prices
Gold prices fell 0.25% today to $2500 an ounce, with a session-high at $2507.
On Monday, gold rose 0.4%, the third profit in four sessions as US yields slid back then.
US Yields
US 10-year treasury yields rose 0.6% on Tuesday away from 15-month lows at 3.650%, in turn hurting non-yielding assets.
US Interest Rates
According to the Fedwatch tool, the odds of a Fed 0.25% September rate cut stood at 71%, and the odds of a larger 0.5% rate cut this month stood at 29%.
Now investors await a batch of crucial US consumer and producer prices data on Wednesday to gather more clues on the likely path ahead for the Federal Reserve.
SPDR
Gold holdings at the SPDR Gold Trust remained unchanged yesterday at 862.74 tonnes, the highest since January 16.
- Odds of BOE rate cut in September recede
- Markets await UK growth data
Sterling rose in European trade on Tuesday against a basket of major rivals, holding its ground above three-week lows against the US dollar following important UK labor data.
The data confirms the resilience of the UK economy, and bolsters expectations the Bank of England will maintain interest rates unchanged at next week’s meeting.
The Price
The GBP/USD rose 0.3% today to $1.3108, with August 21 lows at $1.3058.
The pound fell 0.45% on Monday, the second loss in a row, as the dollar rebounded against most major rivals.
UK Labor Sector
Government data showed the UK economy added 265 thousand new jobs in the three months ending July, passing estimates of 123 thousand easily, while unemployment fell to 4.1% from 4.2%.
The excellent data showcases the strength of the UK labor sector and will likely lead BOE policymakers to maintain interest rates unchanged for an extended duration
UK Rates
Following the data, the odds of a Bank of England interest rate cut in September fell to just 10%, while the odds of such a cut in November were below 50%.
Now traders await important UK monthly growth data on Wednesday to gather more clues.
Analysis
ABN Amro’s chief forex analyst said the recent UK data showed the persistent inflationary pressures in the economy, with stable wages growth likely posing inflationary risks in the medium term.
The bank expects sterling to outperform both the US dollar and the euro in the short and medium terms.
- Odds of Japanese rate hike in September plummet
- Markets await main US inflation data
Yen fell in Asian trade on Tuesday against a basket of major rivals, extending losses for the second straight session against the dollar and backing off four-week highs on profit-taking as most global stock markets rebound.
Weaker than expected GDP growth data for Japan dragged the odds of a Bank of Japan interest rate hike in September lower.
Now investors await important US inflation data for August, which could shed light on the size of the upcoming Fed rate cut in September.
The Price
The USD/JPY pair rose 0.3% today to 143.55 yen per dollar, with a session-low at 142.85.
Yen lost 0.65% yesterday against the dollar, the first profit in five sessions on profit-taking off four-week highs at 141.76.
Global Stocks
Most global stock markets rallied in Asian trade on Tuesday following stellar Wall Street gains on Monday, as risk appetite improves once again with the European Central Bank preparing for a new rate cut later this week.
Global central banks continue to engage in the new policy easing cycle as inflation slows down and GDP growth halts.
Japanese GDP
Final data from the Japanese government showed GDP grew 0.6% in the second quarter, below the expected 0.7% growth rate, and after a 0.6% contraction in the first quarter.
The data reduced the pressure on Bank of Japan’s policymakers and dragged down the odds of a Japanese interest rate hike in September to below 20%.
US Interest Rates
According to the Fedwatch tool, the odds of a Fed 0.25% September rate cut stood at 71%, and the odds of a larger 0.5% rate cut this month stood at 29%.
Now investors await a batch of crucial US consumer and producer prices data on Wednesday to gather more clues on the likely path ahead for the Federal Reserve.
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