Dollar Holds Near Highs Due to US CPI Data and Fed Outlook (10.10.2024)

The dollar index remained strong around 102.9 as markets awaited the release of US Consumer Price Index (CPI) data, which could influence the Federal Reserve’s rate decision in November. 

While a 25 basis point rate cut is expected, recent strong US jobs data has tempered expectations for more aggressive cuts. The Japanese yen fell below 149 per dollar, pressured by weaker domestic data and a stronger dollar. Meanwhile, gold rebounded above $2,610 per ounce, recovering from a six-day decline ahead of the US inflation report, with ongoing geopolitical tensions supporting its safe-haven appeal. The GBP/USD pair focused on upcoming US economic data, with potential volatility anticipated from inflation and unemployment reports. Silver prices also looked to US data for direction, as traders weighed its safe-haven status amid market uncertainties.

Dollar Index Holds Near Two-Month High as Markets Await US CPI Data

On Thursday, the dollar index remained around 102.9, maintaining its highest levels in nearly two months as investors braced for the September Consumer Price Index report, which could impact the Federal Reserve’s interest rate decision in November. The minutes from the Fed's September meeting indicated a division among policymakers regarding the pace of rate cuts, ultimately opting for a significant 50 basis point reduction to balance inflation targets with concerns over the labor market. Following last week’s strong US jobs report, traders have tempered their expectations for aggressive rate cuts from the Fed. Currently, the markets estimate an 83% chance that the Fed will implement a more modest 25 basis point cut in November, effectively dismissing the possibility of another half-percentage point reduction. While the dollar maintained gains against most major currencies, it experienced a slight pullback against the New Zealand dollar, likely reflecting a technical correction.

In the EUR/USD pair, the initial resistance will be at 1.0950 followed by 1.1000 and 1.1050 if this level is surpassed. On the downside, the first support is at 1.0900, with subsequent supports at 1.0850 and 1.0800 below that.

Yen Falls Below 149 as Markets Adjust Fed Rate Cut Expectations

The Japanese yen fell below 149 per dollar, nearing its lowest levels since early August, as traders adjusted their expectations for aggressive Federal Reserve rate cuts following the recent US jobs report and FOMC minutes. Investors are also preparing for upcoming US inflation data, which could impact the Fed's interest rate decisions in November. On the domestic front, data revealed that Japan's producer prices rose more than anticipated in September, marking the 43rd consecutive month of producer inflation. However, lending activity in Japan slowed for the second month in a row in September, reaching its weakest pace in nearly a year. The yen has faced increasing pressure recently as newly appointed Prime Minister Shigeru Ishiba and his economy minister Ryosei Akazawa emphasized the need for caution regarding further rate increases, given the current economic landscape.

In USD/JPY, the first support is at 147.30, with subsequent levels at 145.20 and 144.00 below that. On the upside, the initial resistance is at 149.30, followed by 150.00 and 151.00 if this level is breached.Top of Form

Gold Rises Above $2,610 Ahead of Key US Inflation Data

On Thursday, gold climbed above $2,610 per ounce after experiencing six consecutive days of decline. This uptick comes as investors await key US Consumer Price Index (CPI) data later in the day, which could provide further insights into the Federal Reserve's interest rate outlook. Recently, gold prices had dipped to their lowest point in nearly three weeks, largely due to fading expectations for more aggressive policy moves from the Fed. Minutes from the latest FOMC meeting indicated a split among policymakers regarding potential rate cuts. Some members favored a more substantial half-point reduction, while others preferred a modest quarter-point cut, emphasizing the need for confirmation of a sustained decline in inflation and showing reduced concern about the labor market. This perspective aligns with last week’s jobs report, which highlighted resilience in employment figures. Currently, the market is pricing in an 83% probability of a 25 basis point cut in November. Despite these developments, gold continues to attract investors as a safe-haven asset, particularly in light of ongoing geopolitical tensions in the Middle East.

In gold, the first support is at 2600, with subsequent levels at 2550 and 2500 below that. Above, the initial resistance is at 2635, followed by 2660 and 2685 if this level is surpassed.

GBP/USD Focused on US Economic Data Ahead of UK GDP Report

On Thursday, the GBP/USD pair opened at approximately 1.3070. The direction of this currency pair is likely to be influenced by the upcoming inflation and unemployment data set to be released from the United States today before the UK GDP report scheduled for tomorrow. As traders analyze the U.S. economic indicators, they will be particularly focused on how these figures might shape the Federal Reserve's monetary policy outlook. Strong inflation or unemployment figures could prompt discussions around interest rate adjustments, thereby impacting market sentiment and the GBP/USD exchange rate.

Additionally, given the current economic climate, any unexpected shifts in these data releases could lead to increased volatility in the currency pair. Investors will be keen to gauge how these indicators align with their expectations, which may ultimately inform their trading strategies leading up to the GDP announcement. Overall, today's U.S. economic data could serve as a significant catalyst for movement in the GBP/USD pair, potentially establishing a clearer direction in the days ahead.

In GBP/USD, the first support is at 1.3050, with subsequent levels at 1.3000 and 1.2950 below that. On the upside, the initial resistance is at 1.3100, followed by 1.3145 and 1.3200 if this level is surpassed.

Silver Prices Eye US Economic Data for Direction Amid Market Uncertainty

On Thursday, silver (XAG/USD) opened trading at approximately $30.48. The direction of this precious metal is likely to be significantly influenced by the U.S. inflation and unemployment data set to be released today.

As traders prepare for these economic indicators, they will closely monitor how the results might impact market sentiment and, consequently, silver prices. Strong inflation figures could reinforce expectations of tighter monetary policy from the Federal Reserve, potentially leading to fluctuations in silver’s value. Yet, weaker data may provide support for silver as a safe-haven asset, particularly in light of ongoing economic uncertainties.

In silver, the first support is at 30.45, with subsequent levels at 30.00 and 29.50 below that. On the upside, the initial resistance is at 31.15, followed by 31.85 and 32.20 if this level is surpassed.