Gold Trades Sideways Awaiting for US Retail Sales Data

On Monday, the exchange rate for fluctuated between 2,310 and 2,328. Market participants were awaiting a series of economic reports and statements from Federal Reserve (Fed) officials during the week to determine the timing of their interest rate reduction. Gold finished Tuesday 0.56% lower compared to the previous trading day.

Patrick Harper, the President of the Philadelphia Fed, stated on Monday that they could potentially reduce their benchmark interest rate once this year, contingent upon economic forecasts. However, he left the possibility open for a change in his opinion based on future data. Traders are currently monitoring upcoming comments from other Federal Reserve officials, such as the President of the New York Fed John Williams, and the President of the Richmond Fed Tom Barkin, for further guidance. According to the FedWatch tool, the likelihood of the U.S. rate cut in September 2024 is 61.5%.

Meanwhile, the market is waiting for the U.S. Retail Sales report, which will be released today. This report is expected to provide a signal for the future direction of the market. The fact that the price of gold has fluctuated over the past few days without any major changes suggests that the market is awaiting some event that will break the current stalemate, according to Matt Simpson, a senior analyst with City Index. Wang Tao, a Reuters analyst, supposes that gold may experience a small upward correction.

“Spot gold is biased to retest resistance at $2,340 per ounce, as a bounce from the June 10 low of $2,286.69 looks incomplete,” said Tao.

XAU/USD has been trading sideways during the Asian and early European trading sessions on Tuesday within the 2,320–2,325 range, awaiting the release of the U.S. Retail Sales data at 12:30 p.m. UTC today. A lower-than-expected reading should be seen as positive for XAU/USD, while a higher-than-expected reading should be seen as bearish for gold.

Euro Under Pressure as French Elections Cloud Outlook

The gained 0.32% on Monday but continued to trade near a one-month low amid political jitters in Europe, while investors awaited the upcoming U.S. economic data releases that could potentially shed light on future changes in Federal Reserve (Fed) interest rates.

French parliamentary elections, scheduled to take place in a couple of weeks, have raised fears of a Eurozone budget crisis. Despite a sharp sell-off in French debt instruments, European Central Bank (ECB) officials have not yet stipulated any specific plans to purchase French bonds. Meanwhile, U.S. interest rate cuts are on the horizon. Minneapolis Fed chief, Neel Kashkari, predicted on Sunday that the U.S. central bank would cut interest rates at least once this year. The market, however, is betting that two rate cuts are possible both in the U.S. and in the Eurozone. As the level of interest rates in the U.S. is currently higher, the fundamental pressure on EUR/USD remains bearish. In addition, traders are likely to continue to sell the rallies in the euro until political uncertainty dissipates once a new French government is formed.

EUR/USD was falling slightly during the Asian and early European trading session. Today’s session could see sharp swings in the EUR/USD exchange rate as a string of economic reports will stoke volatility. The focus is on the Eurozone ZEW Economic Sentiment Index due at 9:00 a.m. UTC and the U.S. Retail Sales report at 12:30 p.m. UTC. Arguably, the U.S. data is more important. It will give hints about U.S. consumption and economic strength. In case the report comes out weaker-than-expected, EUR/USD may temporarily rise above 1.07600. Alternatively, better-than-expected results may pull the euro down—possibly below the critical 1.07000 mark.

Pound Declines as Traders Await the BOE Interest Rate Decision and Key Economic Reports

The (GBP) fell by 0.27% on Monday as traders awaited the upcoming macroeconomic reports.

The Bank of England (BOE) is expected to authorize its first interest rate cut in August, later than previously anticipated, due to higher-than-expected inflation, according to Union Bank of Switzerland (UBS) reports. Initially, UBS predicted a rate cut in June, driven by changes in forward guidance and an expected drop in inflation. However, disappointing labor market and inflation data have delayed this. U.K. April CPI inflation fell by only 0.9 percentage points to 2.3% year-on-year, with services inflation at 5.9% year-on-year, higher than the BoE’s projection of 5.5% year-on-year. Political developments, including Prime Minister Sunak’s call for general elections on July 4, have further reduced the likelihood of a June cut.

UBS now expects the Monetary Policy Committee (MPC) to delay the cut until August, post-election. They noted the BoE’s decision to cancel speeches and public statements until after the election indicates a cautious approach. The upcoming June meeting, lacking new projections or a press conference, is expected to maintain the current forward guidance and vote split (7 vs 2), signaling no major assessment changes.

GBP/USD declined during the Asian trading session but rebounded during the morning European trading session. Today’s main event is the U.S. Retail Sales report due at 12:30 p.m. UTC. Recent inflation reports point to a decrease. If retail sales are lower than expected, the chances of a rate cut will increase, pushing the pound higher. Conversely, if retail sales exceed expectations, GBP/USD may continue to fall towards 1.26000. Later this week, investors will focus on two significant events: the U.K. Consumer Price Index (CPI) and the BOE Interest Rate Decision. These events may determine the mid-term future trend for GBP/USD.