Markets Eye US Inflation and Fed Signals, Pressuring Gold, Yen, and Pound (10.11.2024)

The dollar index remained strong near 102.9 on Friday, set for a second consecutive weekly gain as US inflation data and Federal Reserve signals dampened hopes for significant rate cuts. 

While consumer inflation slowed less than expected in September, initial jobless claims surged, fueling mixed expectations for future Fed policy moves. The Japanese yen remained weak, hovering around 148.7 per dollar, pressured by the dollar's strength and cautious Fed outlook. Meanwhile, gold climbed above $2,640 per ounce, gaining amid market uncertainty over US inflation data, though it remains poised for a weekly decline. The pound faced pressure around 1.3050 following US inflation data, with traders now awaiting UK GDP figures. Silver rose to $31.20 as markets await key US producer inflation data, which could provide further insights into economic trends.

Dollar Poised for Weekly Gain Amid Strong Inflation Data and Fed Signals

On Friday, the dollar index remained around 102.9, poised for a second consecutive weekly gain as recent US economic data and signals from the central bank led traders to lower their expectations for Federal Reserve interest rate cuts. Data released on Thursday revealed that consumer inflation slowed less than anticipated in September, raising concerns that continued strong inflation could lead the Fed to forgo a rate cut in its upcoming meetings. Additionally, Atlanta Fed President Raphael Bostic indicated on Thursday that he might support keeping rates steady at the November meeting, depending on prevailing economic conditions. Compounding these developments, initial jobless claims unexpectedly surged, reaching a new high of 258,000 in 14 months. Eyes will be on producer inflation data scheduled for release on Friday to gain further insights into price trends.

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 Nears August Lows as US Data and Fed Signals Support Strong Dollar

On Friday, the Japanese yen was trading around 148.7 per dollar, remaining close to its lowest levels since early August. The yen is under pressure from the dollar's strength, fueled by increasing expectations that the US Federal Reserve will adopt a more cautious approach to interest rate cuts. This shift in sentiment follows robust US jobs and inflation data, along with signals from a key Fed official indicating a preference to keep rates steady in November. In Japan, Prime Minister Shigeru Ishiba stated earlier this month that the current economic climate may not justify further rate hikes. However, this position was somewhat moderated by other senior officials, including Chief Cabinet Secretary Yoshimasa Hayashi, who clarified that Ishiba did not make any specific requests to Bank of Japan Governor Kazuo Ueda during their discussions.

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.

Gold Rises Above $2,640 as Traders Assess Fed Policy Amid Mixed US Data

On Friday, gold climbed above $2,640 per ounce, building on gains from the previous session as traders continued to evaluate the Federal Reserve's policy direction amid mixed economic data. US headline inflation for September decelerated less than anticipated, while core inflation increased more than expected, interrupting recent progress in easing price pressures. This development has strengthened the perception that the Fed will implement rate cuts at a slower pace than previously believed, as suggested by the latest FOMC minutes released on Wednesday. In addition, a rise in jobless claims has raised questions about the resilience of the US labor market under restrictive interest rates. Currently, there is an 86% chance of a 25 basis point cut in the federal funds rate in November. Investors are also awaiting producer inflation data later today for further insights into price trends. Despite Friday’s uptick, gold is on track to record its second consecutive weekly decline.

In gold, the first support is at 2600, with subsequent levels at 2550 and 2500 below that. Above, the initial resistance is at 2645, followed by 2660 and 2685 if this level is surpassed.

GBP/USD Under Pressure as Dollar Strengthens After US Inflation Data

The pound is trading around 1.3050 this morning. Following the release of US inflation data yesterday, the dollar index strengthened, resulting in a weakening of all dollar-denominated assets. Today, the UK will release its GDP figures, which are expected to introduce significant volatility in the pound, especially amid expectations for interest rate cuts in November and December.

In GBP/USD, the first support is at 1.3045, 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 Rises Above $31.20, Awaiting US Producer Price Index Data

This morning, silver is trading around $31.20, with geopolitical risks influencing prices, similar to other metals. Following the recent inflation data, silver closed higher yesterday, contrary to market expectations. Today, the upcoming US Producer Price Index (PPI) data will be significant for the market.

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 31.25, followed by 31.85 and 32.20 if this level is exceeded.