- The Federal Reserve projected only one rate cut in 2024 as compared to three cuts estimated at the March meeting, which is seen underpinning the US Dollar and acting as a headwind for the non-yielding Gold price.
- This week’s softer inflation figures, however, suggest that the Fed could lower borrowing costs earlier than expected, with the CME Group’s FedWatch Tool indicating a greater chance of the first rate cut in September.
- The data published by the US Bureau of Labor Statistics on Thursday showed that the Producer Price Index (PPI) for final demand rose by 2.2% on a yearly basis in May, lower than the 2.3% previous and 2.5% expected.
- Adding to this, the annual core PPI rose 2.3% during the reported month, below April's increase and the market expectation of 2.4%. On a monthly basis, the PPI declined 0.2%, while the core PPI remained unchanged.
- This comes on top of Wednesday's softer CPI report, which showed that consumer prices were unchanged in May for the first time since last June and the yearly rate edged down to 3.3% from the 3.4% recorded in April.
- Separately, the US Department of Labor (DoL) reported that the number of Americans who filed for unemployment insurance for the first time increased more than anticipated, to 242K last week from the 229K previous.
- Meanwhile, a snap election call in France sparked wider political concerns and should limit losses for the safe-haven XAU/USD against the backdrop of Russia’s ongoing war in Ukraine and conflict in the Middle East.
- Investors now look to the Preliminary release of the Michigan US Consumer Sentiment Index, which could influence the USD price dynamics and produce short-term trading opportunities on the last day of the week.
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