Gold Lacks Bullish Momentum
Gold (XAU) declined on Friday, losing initial gains XAU/USD got on the back of the weakening US dollar.
Economic data indicating a slowing U.S. economy brought the US dollar to its lowest point in nearly a month as the chances of additional rate hikes by the Federal Reserve decreased. 'Data indicating some weakness in labor markets helped drive market expectations around the Fed and thus drove gold higher today. This comes after a retrenchment in some of the risk-off flows that have occurred as concerns about a broader Middle East conflict have ebbed,' said Christopher Louney, a commodities strategist at RBC Capital Markets.
Today, XAU/USD decreased in the Asian trading session but rose in the early hours of the European session. The People's Bank of China maintained its one and five-year loan prime rates unchanged at 3.45% and 4.2%, aligning with market forecasts. 'Spot gold looks neutral in a range of $1,976–1,990 per ounce, and an escape could suggest a direction,' said Reuters analyst Wang Tao.
The Japanese Yen Benefitted From the US Dollar Weakness
The Japanese yen rose over 149.000, reaching its highest level in over five weeks, driven by overall weakness in the US dollar. Now, the market doesn't expect rate hikes from the Federal Reserve. Expectations shifted towards a more dovish policy by the regulator, so investors believe rate cuts will come in May 2024.
Recent data revealed that Japan's economy shrunk more rapidly than anticipated in Q3 as the global demand declined and domestic inflation increased. The Bank of Japan (BOJ) repeated its dedication to continuing its current loose monetary policy, implementing only minor modifications to its yield curve control measures. The BOJ adjusted its approach to the 10-year Japanese government bonds, designating 1% as a flexible 'upper bound' instead of a strict limit. The regulator also said it wouldn't defend this level via unlimited bond purchases.
USD/JPY declined during the Asian trading session but grew in the early European trading hours. Today, the formal macroeconomic calendar is uneventful for the pair. This week, investors will focus on upcoming preliminary manufacturing and services PMI figures and inflation data from Japan, which will provide insights into the country's economic state and possible changes in the monetary policy.