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Dollar backs off three-month high ahead of retail sales data
Dollar fell in European trade on Thursday against a basket of major rivals, extending losses for the second day away from three-month high on profit-taking, while US treasury yields slow down.
The decline comes ahead of important US retail sales, unemployment claims, and industrial production data, which could provide fresh clues on the future path of US interest rates.
The Index
The dollar index fell 0.15% to 104.58, with a session-high at 104.72, after closing down 0.2% on Wednesday, the first loss in three days away from a three-month high at 104.98.
US Yields
US 10-year treasury yields fell 0.8% on Thursday away from recent 11-week highs at 4.332%, underpinning non-yielding assets like gold.
The developments come ahead of important US data and remarks by Fed officials later today, expected to delineate the future of US interest rates.
US Rates
Markets are currently pricing in an 11% chance of a Fed 0.25% interest rate cut in March, with only a 44% chance of such a cut in May.
Traders now expect 3 or 4 Fed rate cuts, valued at 100 basis points in 2024, down from 150 basis points of rate cuts in previous forecasts according to the LSEG interest rate probability app.
Chicago Fed President Austan Goolsbey recently warned from waiting too long before cutting interest rates, taking an usually bearish stance on the issue.
US Data
Now traders await important US retail sales, unemployment claims, and industrial production later today to determine the likely path ahead for monetary policies.
US retail sales are expected down 0.2% in January, compared to a 0.6% rise in December, while core sales, excluding automobile sales, are expected up 0.2%.
US unemployment claims are expected up slightly to 219 thousand last week from 218 thousand.
Finally, US industrial production is expected up 0.2% in January, accelerating from a 0.1% increase in December.
Gold starts recovering as US treasury yields taper off
Gold prices rose in European trade on Thursday for the first session in seven, starting to recover from two-month lows as US treasury yields slow down.
Now traders await crucial US data later today that will help determine the likely path ahead for Fed policies this year.
Gold Prices Today
Gold prices rose 0.2% to $1,996 an ounce, with a session-low at $1,990, after falling 0.1% on Wednesday, the sixth loss in a row, plumbing two-month lows at $1,984 as the odds of a Fed rate cut in March wane.
US Yields
US 10-year treasury yields fell 0.8% on Thursday away from recent 11-week highs at 4.332%, underpinning non-yielding assets like gold.
The developments come ahead of important US data and remarks by Fed officials later today, expected to delineate the future of US interest rates.
US Rates
Markets are currently pricing in an 11% chance of a Fed 0.25% interest rate cut in March, with only a 44% chance of such a cut in May.
Traders now expect 3 or 4 Fed rate cuts, valued at 100 basis points in 2024, down from 150 basis points of rate cuts in previous forecasts according to the LSEG interest rate probability app.
Chicago Fed President Austan Goolsbey recently warned from waiting too long before cutting interest rates, taking an usually bearish stance on the issue.
Now traders await important US retail sales, unemployment claims, and industrial production later today to determine the likely path ahead for monetary policies.
The SPDR
Gold holdings at the SPDR Gold Trust fell 1.44 tonnes yesterday, the second decline in a row, to a total of 839.04 tonnes, the lowest since August 2019.
Sterling extends losses after surprising growth data
Sterling fell in European trade on Thursday against a basket of major rivals, extending losses for the fourth straight session against the dollar following surprising UK growth data.
The data showed the UK economy contracted more than expected in the fourth quarter of last year, likely pressuring Bank of England to ease policies sooner than planned.
GBP/USD
GBP/USD fell 0.2% to 1.2542, with a session-high at 1.2574, after closing down 0.2% on Wednesday, the third loss in a row, plumbing a one-week trough at 1.2525 following UK consumer prices data.
Surprising Data
Earlier UK data showed the GDP contracted by 0.3% in the fourth quarter of 2023, while analysts expected a 0.1% contraction, and after a 0.1% contraction in the third quarter.
Such data clearly puts pressure on BOE policymakers to start easing policies and cutting rates as soon as possible to prop up growth.
UK Rates
Markets now expect a 20%% chance of a BOE rate cut in March, and a 70% chance of such a cut in May.
Traders overall expected an average of 78 basis points of UK interest rate cuts this year, up from 69 basis points before growth data.
Gold plumbs three-month trough
Gold prices fell on Wednesday as markets reassess likely monetary policy decisions by the Federal Reserve in upcoming months.
Such losses came after higher US treasury yields, as data showed US inflation rose more than expected in January, likely leading the Fed to delay the timeline of interest rate cuts.
Later this week, important data on US producer prices and retail sales data will provide important clues on the path ahead for Fed policies.
Otherwise, the dollar index fell 0.2% as of 19:16 GMT to 104.7, with a session-high at 104.9, and a low at 104.6.
On trading, gold spot prices fell 0.2%, or $3.30 as of 19:17 GMT to $2003.9 an ounce, a mid-November low.