On Thursday, the South African rand (ZAR) was the best-performing currency among the 20 global currencies we track, while the Turkish lira (TRY) showed the weakest results. The Australian dollar was the leader among majors, while the US Dollar underperformed.
Gold Is Struggling as Traders Prepare for Inflation Test
Gold (XAU) dropped to a more than six-month low on Thursday after better-than-expected macroeconomic data from the U.S. reinforced the belief that the Federal Reserve's (Fed) stance on monetary policy will remain hawkish.
U.S. weekly Jobless Claims beat expectations for the sixth time in a row, signaling that the labor market remains tight, which may potentially fuel inflation. In addition, Neel Kashkari, Minneapolis Fed President, said it was not clear whether the central bank is finished raising rates amid ample evidence of ongoing economic strength. Although the US Dollar Index (DXY) weakened yesterday, it remains relatively high by historical standards and continues to exert downward pressure on precious metals.
XAU/USD rose slightly in the Asian and early European sessions, mostly due to a technical correction after yesterday's severe drop. Today, traders should focus on the release of the Personal Consumption Expendidute (PCE) Price Index at 12:30 p.m. UTC. If figures are higher than expected, investors will expect more rate hikes, and XAU/USD may continue falling.
"Spot gold may bounce into a range of $1,873 to $1,877 per ounce, as suggested by the bullish divergence on MACD", said Reuters analyst Wang Tao.
Bitcoin May Rally Amid Government Turmoil
On Thursday, Bitcoin rose sharply to the $27,100 level as the US Dollar Index (DXY) retreated from a 10-month high.
Bitcoin (BTC) has been trading sideways for the past six months but has generally managed to withstand the bearish pressure induced by the hawkish monetary policy from global central banks. Investors now speculate that political instability may substantially raise the attractiveness of crypto assets, including BTC. Indeed, the prospect of a possible government shutdown in the U.S. may fuel a rally in BTC/USD, as was the case during the previous period of economic uncertainty and instability when regional U.S. banks started to crumble in early 2023.
BTC/USD was rising slightly during the Asian and early European trading sessions. Yesterday's strong rally has paused as traders await the publication of a critical Personal Consumption Expenditure (PCE) report, due to be released by the Bureau of Economic Analysis at 12:30 p.m. UTC. It is very hard to predict how the PCE Price Index data will play out for BTC. On the one hand, higher-than-expected figures should raise the likelihood of more interest rates from the Federal Reserve, thus putting downward pressure on BTC. On the other hand, rising inflation and higher interest rates may potentially trigger a recession, and BTC may actually benefit from it as investors turn to alternative, nonconventional assets, such as crypto. ‘It will be very interesting to see if the market is going to buy Bitcoin during all different types of periods of US economic/financial uncertainty’, said Mr. Stephane Ouellette, co-founder, and chief executive of FRNT Financial.