Gold prices experienced a notable upswing on Thursday, climbing by 1.61% in response to unexpectedly high US jobless claims data.
Recent statistics unveiled a surge in new claims for unemployment benefits filed by Americans over the past week, reaching 231,000, surpassing the forecasted 210,000. This data underscores a gradual cooling in the US labor market. Consequently, the CME FedWatch tool now indicates a 68.5% probability of a Federal Reserve (Fed) rate cut in September.
San Francisco Fed President Mary Daly emphasized the uncertainty surrounding US inflation’s trajectory, expressing hope for a continued decrease in price pressures. Despite these sentiments, ongoing conflict in the Middle East persists, with Israel announcing the conclusion of recent indirect negotiations in the Cairo region. Israel remains committed to its activities in Rafah and other Gaza Strip areas, amplifying geopolitical tensions.
In addition to geopolitical uncertainties, news of the People’s Bank of China (PBoC) adding 60,000 troy ounces of gold to its reserves in April further bolstered gold prices.
During Asian and early European trading sessions, XAU/USD continued its ascent, with market attention turning to the release of the US Michigan Consumer Sentiment Index later in the day. Anticipated figures may exert bearish pressure on XAU/USD if higher than expected, whereas lower-than-anticipated numbers could propel the pair higher.
Euro Strengthens Amid Elevated US Jobless Claims
The euro (EUR) saw a 0.31% uptick following the release of higher-than-anticipated US initial jobless claims figures.
Data revealed a rise in initial jobless claims to 231,000, exceeding expectations of 210,000 and marking an increase from the previous week’s 209,000. This escalation raised concerns about potential labor market softening, leading to downward pressure on US Treasury yields and the US dollar. Cooling US economic data fuels speculation of an earlier-than-expected rate cut by the Federal Reserve.
TD Securities strategists remarked on the potential impact of next week’s US Consumer Price Index (CPI) print on market sentiment, suggesting a downside surprise may sustain the bearish USD trend. They highlighted the technical nature of the current market setup.
Despite the US dollar’s perceived overvaluation, TD Securities strategists advocated for buying on dips against the euro and other currencies, citing differing central bank monetary policies as supportive factors.
EUR/USD experienced a minor correction during Asian and early European trading sessions following the previous day’s rise. Market focus now shifts to the forthcoming US Michigan Consumer Sentiment report, which may prompt heightened volatility depending on whether the figures align with expectations.
Canadian Dollar Gains Ground on Weak US Labor Data
The Canadian dollar (CAD) surged by 0.35% on the heels of lackluster US labor data released on Thursday.
The release of weak US initial jobless claims figures contributed to declines in US Treasury yields and the US dollar. Initial jobless claims for the week ending May 3 exceeded estimates, reaching 231,000 and rising from the previous week’s 209,000.
Meanwhile, the Bank of Canada (BOC) released its Financial System Review (FSR), with Governor Tiff Macklem highlighting Canada’s financial system’s resilience. However, Macklem cautioned about potential market volatility amid evolving expectations regarding rate cuts. Growth in crude oil prices, Canada’s main export, may buoy the Canadian dollar and limit gains against the USD.
USD/CAD remained volatile but largely unchanged during Asian and early European sessions. Traders await the Canadian Employment Change report and the US Michigan Consumer Sentiment report, both of which may influence market dynamics and USD/CAD movements.
