USD Index regains composure near 103.70 ahead of key data

USD Index regains composure near 103.70 ahead of key data

The EUR/USD reached two-week highs at 1.0947 and subsequently experienced a pullback, although it has remained comfortably above the 1.0900 level. The overall bias continues to favor the upside, with support coming from the corrective movement of the US Dollar. Recent data releases from the US have exerted pressure on the Greenback, while inflation figures in the Eurozone suggest that additional tightening may be necessary from the European Central Bank (ECB).
The annual inflation rate in Germany fell from 6.2% to 6.1% in August. Although the trend is downward, it remains elevated. In Spain, the annual rate rose from 2.3% to 2.6% as expected, with the core rate remaining above 6%. Despite the downward trend, inflation levels remain too high, leaving room for potential tightening from the ECB. Consumer and business confidence indicators dropped in August. On Thursday, more inflation data is due with the Eurozone Consumer Price Index.
Employment in the US private sector is expected to rise by 195,000 in August following the 324,000 increase recorded in July. A reading between 100,000 and 150,000 could cause investors to continue to lean toward a no change in the Fed policy rate in 2023 and hurt the USD. According to the CME Group FedWatch Tool, markets are currently pricing in a 50% probability that the Fed interest rate will remain unchanged at 5.25%-5.5% range by the end of the year.
Gold Price (XAU/USD) holds steady at the highest level in four weeks during a four-day winning streak as market players await the key inflation clues from the US and Eurozone. That said, the recently downbeat US data have raised concerns about the Federal Reserve’s (Fed) policy pivot and bolstered the XAU/USD price. On the same line could be the hopes of witnessing more stimulus from the key customer China. However, the cautious mood ahead of the top-tier data and mixed activity numbers from China prod the Gold buyers hopeful.
Looking ahead, the Eurozone CPI and HICP numbers for August will join the risk catalysts to entertain the XAU/USD traders. However, major attention will be given to the US Core Personal Consumption Expenditure (PCE) Price Index for August, expected to remain unchanged at 0.2% MoM but edge higher to 4.2% YoY from 4.1% prior. Should the US inflation gauge ease, the Gold buyers will seek softer clues from the Nonfarm Payrolls (NFP) to confirm an end to the Fed’s hawkish cycle, which in turn can propel the XAU/USD price.
S&P500 futures remain sideways amid a quiet market mood as investors await the US private employment data. US equities were significantly bought on Tuesday after weaker than anticipated Job Openings data, which elevated Federal Reserve (Fed) soft landing hopes. Softer labor demand indicates that the job market is losing its resilience.
Fewer demand for labor by US firms was also the outcome of lower resignations by workers. Employees seem reluctant to switch jobs as the labor market is not as hot as it was earlier. For more information about the current status of the US labor market, ADP Employment data will be keenly watched.
The USD/CHF pair lost its recovery momentum and held below the 0.8800 mark during the early Asian trading hours on Thursday. Meanwhile, the US Dollar Index (DXY), a measure of the value of USD against six other major currencies, loses momentum and hovers around 103.00. At the time of writing, the USD/CHF is trading at 0.8772, losing 0.14%.
Automatic Data Processing, Inc. reported on Wednesday that the US ADP Employment Change dropped to 177K in August from 371K in July and came in below the market expectation of 195K. Additionally, the first estimate of Personal Consumption Expenditures (PCE) Prices in Q2 fell to 2.5% versus 2.6% prior. Finally, the second estimate of Gross Domestic Product (GDP) Annualised Q2 decreased to 2.1% from the first estimation of 2.4%.