Gold Rises Slightly Ahead of Today's NFP Report
The gold (XAU) price rose 0.17% in a very quiet trading session on Thursday as the US Dollar Index (DXY) dropped sharply.
As expected, the volatility in the market has decreased ahead of the important Nonfarm Payroll (NFP) report, which will come out today at 1:30 p.m. UTC. Investors expect to see further evidence of a slowing U.S. economy and weakening labor market that may increase the chances of an interest rate cut in Q1 2024. Expectations are high, so there is a risk investors may be disappointed. 'The markets have gotten in front of themselves on the interest rate expectations,' said Chris Gaffney, the president of world markets at EverBank. He added that the only risk to metals prices is if 'the Fed has to keep rates higher for longer' next year. Markets currently price in a 60% probability of a rate cut in March. However, a recent Reuters survey suggested that the U.S. base rate will stay unchanged until July.
XAU/USD increased in the Asian trading session but then started to decline in the early hours of the European trading session. The main event today is the U.S. NFP report at 1:30 pm UTC. The market expects to see 180,000 new jobs created last month. If the actual numbers surpass expectations, a strong sell-off in XAU/USD is almost guaranteed, possibly below 2,000. However, if the NFP numbers are weaker than expected, gold will likely consolidate above 2,040. Traders should also focus on the growth in average earnings to see if they are also slowing down. Also, the Consumer Sentiment report is at 3:00 p.m. UTC and might add more volatility to the market. 'Spot gold looks neutral in a range of $2,019 to $2,039 per ounce, and an escape could suggest a direction.' said Reuters analyst Wang Tao.
EUR/USD Trades in a Tight Range Ahead of Today's NFP Report
The euro (EUR) gained 0.28% on Thursday as the European Gross Domestic Product report for Q3 aligned with the forecast.
After declining for 6 consecutive trading sessions, EUR/USD stabilized and recovered slightly as the US Dollar Index (DXY) plunged due to a resurgent Japanese yen (JPY). In addition, the European GDP report confirmed that the economy shrank by only 0.1% in Q3. However, it's unclear if the recent rally in EUR/USD is sustainable, as some European Central Bank (ECB) officials have started to sound less hawkish lately.
EUR/USD was falling slightly in the Asian and early European trading sessions after the German statistics office said that German inflation eased to 2.3% in November. Today, traders should focus on the U.S. NFP report at 1:30 pm UTC. The report usually causes increased volatility in the forex market. If the report is strong—average hourly earnings rise, unemployment drops, or the number of jobs created is higher than expected—EUR/USD will continue to decline, possibly towards 1.07000. However, any indications that the U.S. labor market is weakening may invigorate EUR/USD bulls, and the pair may attempt to rise towards 1.08000. 'I'm more interested in seeing what happens with the unemployment rate and what happens with average earnings than the nonfarm payroll numbers,' said Ray Attrill, the head of FX strategy at National Australia Bank.