Gold prices rose in the European market on Wednesday, resuming gains after a two-day pause and moving back toward a three-week high. This came as the recent rally in the US dollar paused in the foreign exchange market.

Following a second consecutive monthly rise in US consumer prices, investors are now awaiting further inflation data, which will offer stronger clues about the likelihood of interest rate cuts by the Federal Reserve this year.

The Price

Gold prices rose by 0.55% to $3,343.10, up from the session’s opening level of $3,324.38, after hitting a low of $3,323.69.

At Tuesday’s settlement, gold prices fell by 0.6%, marking a second straight daily loss due to continued profit-taking from the recent three-week high of $3,375.01 per ounce.

US Dollar

The US Dollar Index fell by 0.2% on Wednesday, retreating from a three-week high of 98.70, reflecting a decline in the US currency against a basket of major and minor rivals.

Aside from profit-taking, the dollar’s drop is also due to investor reluctance to open new long positions ahead of upcoming inflation data.

US Interest Rates

• On Monday, President Donald Trump renewed his criticism of Federal Reserve Chairman Jerome Powell, stating that interest rates should be at 1% or lower.

• The Consumer Price Index rose by 2.7% annually in June — its second monthly increase — up from 2.4% in May and exceeding the market’s forecast of 2.6%. This marks the highest reading since February.

• Price increases in goods such as coffee, audio equipment, and home furniture contributed to the rise in June inflation, with imported goods seeing significant hikes due to Trump’s tariffs.

• Following the data, CME Group’s FedWatch tool showed a drop in the probability of a 25-basis-point rate cut in July from 5% to 2%, while the likelihood of rates staying unchanged rose from 95% to 98%.

• For September, the odds of a 25-point cut dropped from 62% to 55%, while the chances of no change rose from 38% to 45%.

• According to data from the London Stock Exchange, traders are currently pricing in less than 50 basis points of total rate cuts for the rest of the year, with the first expected 25-point cut now projected for October.

• To reassess these expectations, investors are awaiting June’s Producer Price Index (PPI), due later today, which is considered a leading indicator of July’s consumer inflation trends.

Gold Outlook

• Brian Lan, managing director at Singapore-based dealer Gold Silver Central, said: “Gold is currently stable with a slight downward bias, especially with the US dollar holding strong.”

• He added: “However, many countries are still negotiating with the US over tariffs. There’s still a lot of uncertainty in the market, and many are seeking safe havens.”

SPDR Fund

Gold holdings with SPDR Gold Trust — the world’s largest gold-backed exchange-traded fund — remained unchanged yesterday for the second consecutive day, with total holdings steady at 947.64 metric tons.

The British pound edged higher in European markets on Wednesday against a basket of global currencies, holding above its three-week low against the US dollar recorded yesterday, and heading toward its first gain in nine days, supported by active buying from low levels.

Recent comments by Bank of England Governor Andrew Bailey have increased expectations of a UK interest rate cut in August. To reassess these expectations, investors are awaiting the release of key UK inflation data for June later today.

The Price

• Pound exchange rate today: The pound rose against the dollar by 0.1% to $1.3400, up from the opening price of $1.3385, with a recorded low at $1.3382.

• On Tuesday, the pound lost 0.3% against the dollar, marking its eighth consecutive daily loss — its longest losing streak since March 2020 — and hit a three-week low of $1.3379 due to the strengthening of the US currency and yields following strong US inflation data for June.

Andrew Bailey

Bank of England Governor Andrew Bailey told The Times on Monday that the direction of interest rates is definitely downward. In the interview, he gave a strong signal that the Bank would accelerate the pace of rate cuts if further signs of "slack" appear in the economy.

The term "slack" refers to a scenario where the economy is not operating at full capacity, with rising unemployment and slowing production. This is considered disinflationary and would reinforce the Bank’s confidence that inflation will fall to 2.0% by 2026, as currently forecast.

UK Interest Rates

• Traders are increasing their bets on Bank of England rate cuts, expecting at least 50 basis points of additional easing this year.

• The probability pricing for a 25-basis-point rate cut by the Bank of England in the August meeting currently stands above 80%.

UK Inflation Data

To reassess the current expectations regarding UK interest rates, investors are awaiting the release of key inflation data in the United Kingdom for June, which is expected to significantly influence the Bank of England's monetary policy path.

At 07:00 GMT, the Consumer Price Index is expected to show a year-on-year rise of 3.4% in June, matching the previous reading, while the core Consumer Price Index is also expected to rise by 3.5% year-on-year, also matching the prior reading.

Outlook for the British Pound

At Economies.com Today, we expect that if the UK inflation data comes in below market expectations, the likelihood of a rate cut in August will increase, which would lead to further downside pressure on the pound.

The Japanese yen declined in Asian markets on Wednesday against a basket of major and minor currencies, deepening its losses for the fourth consecutive day against the US dollar and hitting its lowest level in three months. It may soon fall below the 150-yen threshold due to the continued rise in yields on US 10-year Treasury bonds.

The latest US inflation report showed signs that President Donald Trump's tariffs have begun to affect prices, leading to reduced expectations of a US interest rate cut in September.

Despite rising expectations of a rate hike by the Bank of Japan in its meeting later this month, the market is still awaiting the release of more key economic data from Tokyo, including inflation, wages, and unemployment figures in the world’s third-largest economy.

The Price

• Japanese yen exchange rate today: The dollar rose against the yen by about 0.2% to ¥149.07 — the highest since April 3 — from today’s opening price of ¥148.83, with a low recorded at ¥148.71.

• The yen lost 0.8% against the dollar at Tuesday’s close, marking its third straight daily loss due to the US inflation data.

US Bond Yields

The yield on US 10-year Treasury bonds rose by 0.25% on Wednesday, extending gains for the fifth consecutive session, and reached a five-week high of 4.495%, which enhances the appeal of US dollar investments.

This development in the US bond market followed the release of the June US inflation report, which showed a second consecutive monthly rise in prices — the fastest pace in four months.

The Consumer Price Index rose by 2.7% year-on-year in June, up from 2.4% in May, surpassing market expectations of a 2.6% increase. This is the highest reading since February.

The rise in prices of various goods — such as coffee, audio equipment, and home furniture — contributed to the inflation uptick in June, with significant price hikes in these imported items due to Trump’s tariffs.

Following the data, and according to the CME Group's FedWatch tool: the pricing for a 25-basis-point interest rate cut at the September meeting dropped from 62% to 55%, while the probability of rates being kept unchanged rose from 38% to 45%.

Opinions and Analysis

• Nathaniel Casey, investment strategist at Evelyn Partners, said the rise in US commodity prices could be an early sign of inflationary pressures stemming from tariffs, though it is too soon to confirm this trend.

• Casey added: While this inflation report isn’t particularly alarming, the increase in commodity prices and ongoing uncertainty over future tariff levels might make the Federal Reserve and Chairman Jerome Powell hesitant to cut interest rates.

Japanese Interest Rates

• Recently released data in Tokyo has added pressure on policymakers at the Bank of Japan.

• Amid this data, the market pricing for a 25-basis-point rate hike by the Bank of Japan at the July meeting rose from 35% to 45%.

• To reassess these expectations, investors are awaiting more data on inflation, unemployment, and wages in Japan.

Corn futures prices in Chicago rose at the close of trading on Tuesday, continuing their rebound from recent lows, as US government data confirmed favorable conditions for this year’s corn crop.

Soybean prices declined as strong crop ratings weighed on the market, while wheat futures also dropped amid rising harvest volumes across the Northern Hemisphere that are casting a shadow over the market. Investors are awaiting US inflation data due later on Tuesday for further guidance, while continuing to assess the potential impact of the sweeping tariffs proposed by US President Donald Trump.

The US Department of Agriculture stated on Monday that 74% of the US corn crop and 70% of the soybean crop are in good or excellent condition — the highest July ratings since 2016.

Forecasts still point to a favorable mix of moderate heat and regular rainfall over the coming week across the US Midwest.

“US weather looks fantastic, but seasonal forecasts point to a general downturn,” said Peak Trading Research in a note. “Markets have shrugged off Trump’s new tariff wave and are now nervously awaiting today’s consumer price index reading,” it added, in reference to the CPI.

Corn regained some strength on Monday and during Tuesday’s trading, with analysts viewing the market as vulnerable to an upward correction from current low levels. Analysts at JP Morgan said, “We remain bullish on corn prices on the Chicago Board of Trade and expect the value to be attractive for consumers at these levels,” describing the corn market as being oversold.

Reuters calculations based on customs data showed that China, the world’s largest soybean buyer, imported record volumes of soybeans in June, driven by increased shipments from its biggest supplier, Brazil.

The National Oilseed Processors Association is expected to report that US demand for soybeans in June fell to its lowest level in four months, according to analysts, although it would still mark the largest June demand ever due to expanded processing capacity.

The wheat market is awaiting the results of an import tender from Algeria, which could boost potential demand amid plentiful harvests arriving across the Northern Hemisphere.

Corn

As for trading, corn futures for December delivery rose 0.3% at the end of the session to $4.19 per bushel.

Soybeans

Soybean futures for November delivery fell 0.5% to $10.01 per bushel.

Wheat

Wheat futures for September delivery settled down 0.5% at $5.38 per bushel.