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Gold, Euro Rise on Higher-Than-Expected US Jobless Data

Published 05/10/2024, 04:19 AM

Gold Rises on Unexpectedly High US Jobless Claims Data

On Thursday, the gold (XAU) price rose by 1.61% due to softer than expected US Jobless Claims report.

Data released on Thursday indicated that the number of new claims for unemployment benefits filed by Americans over the past week increased to 231,000, exceeding the anticipated 210,000. The US economic data provides more evidence that the labour market is gradually cooling. According to the CME FedWatch tool, there is now a 68.5% probability of a rate cut by the Federal Reserve (Fed) in September. San Francisco Fed President Mary Daly said that,

"There is considerable uncertainty about where US inflation will head in the coming months".

However, she hopes that price pressures will continue to decrease further. Conflict in the Middle East continues to unfold. Despite calls for peace from Western countries, Israeli officials announced on Thursday that the latest round of indirect negotiations in the Cairo region has concluded. Israel stated it will continue its activities in Rafah and other areas of the Gaza Strip as planned. Continuing geopolitical tensions, combined with the latest news that the People's Bank of China (PBoC) added 60,000 troy ounces of gold to its reserves in April, strongly support gold prices.

XAU/USD continued to rise during the Asian and early European trading sessions. The market is waiting for the US Michigan Consumer Sentiment Index to be released at 2:00 p.m. UTC today. Higher-than-expected figures may be bearish for XAU/USD, while lower-than-anticipated numbers may push the pair higher.

Higher-Than-Expected US Jobless Claims Pushes Euro Higher

The euro (EUR) gained 0.31% yesterday following higher-than-expected US Initial Jobless Claims figures.

Initial jobless claims figures increased to 231,000, exceeding expectations of 210,000 and rising from last week's 209,000. The growth in jobless claims has heightened concerns about a potential easing in labour market conditions. The number of applications for unemployment benefits surged to its highest level since August 2023, exerting downward pressure on US Treasury yields and the US dollar. Cooling US data fuels speculation that the Federal Reserve (Fed) may consider lowering the base rate sooner.

"Markets have put September back in play, but much will hinge on the inflation outlook in the months ahead. Next week's US Consumer Price Index (CPI) print will be a litmus test, where we think a downside surprise is needed to keep the bearish USD theme going. With that in mind, we still think the market setup is highly technical in the short term," commented TD Securities strategists.

The US dollar appears significantly overvalued, yet traders should consider buying on dips against the euro and other currencies. TD Securities strategists argue that the difference in central banks' monetary policies can continue to support the greenback.

EUR/USD slightly corrected downwards during the Asian and early European trading sessions after yesterday's rise. Investors are now focusing on the forthcoming US Michigan Consumer Sentiment report, scheduled for release at 2:00 p.m. UTC. If the numbers are below market expectations, it could push EUR/USD up towards the 1.08000 mark. Conversely, figures exceeding expectations may put bearish pressure on the pair.

CAD Rallies on the Weak US Labour Data

The Canadian dollar (CAD) surged by 0.35% yesterday following the release of weak US labour data.

US Treasury yields and the US dollar declined after the release of a weak US Initial Jobless Claims report on Thursday. According to the US Bureau of Labor Statistics (BLS), Initial Jobless Claims for the week ending May 3 increased towards 231,000, exceeding the estimated 210,000 and rising from the previous week's 209,000.

Meanwhile, the Bank of Canada (BOC) released its Financial System Review (FSR) on Thursday. Central Bank Governor Tiff Macklem emphasised that Canada's financial system remains resilient. However, he warned about potential market volatility as expectations evolve regarding the extent and timing of rate cuts. Macklem also noted that financial institutions need to adapt to higher rates and potential shocks, which pose risks to financial stability. Still, growth in crude oil prices—the main Canadian export—may support the Canadian dollar and limit USD/CAD gains. West Texas Intermediate (WTI) oil is now moving around 79.40. 'Black gold' is rising on optimism about increasing demand in China and the US, the world's largest crude-consuming nations.

USD/CAD was volatile but almost unchanged during the Asian and early European trading sessions. Today, traders should focus on two events. The first is the Canadian Employment Change report at 12:30 p.m. UTC. The market expects to see 18,000 jobs added in April, with the unemployment rate rising to 6.2%. Disappointing data could solidify anticipations of a rate cut from the BOC and push USD/CAD towards 1.37100. Otherwise, the Canadian dollar may continue to strengthen. Additionally, the US Michigan Consumer Sentiment report, due at 2:00 p.m. UTC today, may trigger above-normal volatility.

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