The pressure on the United States dollar remains persistent in early trading this week following the release of labor market data indicating weakness. The job market is a key indicator that the Federal Reserve considers when setting interest rates.
Consequently, market participants believe that the weakened labor market gives the Fed an opportunity to cut interest rates up to three times for the remainder of this year. This sentiment is expected to continue influencing market movements during the European trading session on Tuesday.
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GOLD
Gold prices (XAUUSD) continue their trend of reaching record highs. On Monday, the price of Gold surged by $49 due to expectations of three interest rate cuts by the Fed this year.
The upward movement in Gold persisted today, reaching $3,657 per troy ounce, setting a new record. Compared to the closing prices on Monday, Gold rose by more than $21 or 210 pips.
Positive sentiment for Gold has increased as it is reported that the People’s Bank of China (PBoC) has been actively purchasing Gold to bolster its foreign reserves. As of August, the PBoC has been buying Gold for ten consecutive months.
The PBoC’s continuous buying spree, despite rising Gold prices, has the potential to influence market sentiment, leading to expectations that Gold prices will keep climbing.
OIL
Oil prices (CLS10) increased by $0.48 to $62.44 per barrel in early trading last week. The positive sentiment for Oil comes after OPEC+ agreed to boost production by 137,000 barrels per day next month, which is significantly lower than the increase of 555,000 barrels per day this month.
This sentiment will likely continue to influence Oil prices during European trading. The pressure on the US dollar also has the potential to enhance demand for Oil.
EURUSD
The EURUSD pair rose by 419 points (41.9 pips) to 1.17604 during trading on Monday. This exchange rate also reached its highest level in five weeks due to the intense pressure on the US dollar.
Without significant economic data releases today, the EURUSD is still expected to remain supported by positive sentiment during European trading.
GBPUSD
The GBPUSD pair climbed by 332 points (33.2 pips) to 1.35385 on Monday, and today it saw a considerable increase. This currency pair reached 1.35385, the highest level since mid-August.
The immense pressure on the US dollar stemming from expectations of interest rate cuts by the Fed will likely continue to provide positive momentum for GBPUSD.
USDJPY
The USDJPY exhibited considerable volatility during trading on Monday in response to the resignation of Japanese Prime Minister Shigeru Ishiba. The Yen faced pressure causing USDJPY to spike to 148.576, but then reversed to close at 147.449.
Today, USDJPY has decreased by approximately 450 points (45 pips) to 147.000. This movement highlights the significant pressure on the US dollar. On the other hand, the market perceives Ishiba’s resignation as potentially providing political certainty, given his position’s instability in recent weeks.
This certainty has consequently provided positive sentiment towards the Yen, indicating that USDJPY may face further pressure during the European trading session.
NASDAQ
Expectations that the Federal Reserve will cut interest rates three times this year have led to a rise in the Nasdaq by 125 index points to 23,797 during the early trading last week.
Aggressive interest rate cuts could potentially stimulate economic growth in the US, hence generating positive sentiment towards the stock index.
