- Gold price trades closely to near the two-month high around $2,085 as investors’ expectations for Federal Reserve rate cuts in the June policy meeting have increased. As per the CME FedWatch tool, traders see a little over 57% chance for a rate cut by 25 basis points (bps) in the June meeting above from 53%, noted on Friday.
- The expectations for rate cuts in June have escalated as the United States core Personal Consumption Expenditure Price Index (PCE) data for January was in line with market consensus.
- This week, the strength in the Gold price will be tested by the US ISM Services PMI and labor market data for February, as well as Fed Chair Jerome Powell’s testimony before Congress.
- Fed Powell is set to speak on Wednesday and Thursday. His outlook on interest rates could influence market expectations for the timing of rate cuts. Powell may reiterate the need for more evidence to confirm that inflation will sustainably return to the 2% target.
- Resilient labor market conditions have deepened uncertainty about inflation returning to 2%. On Friday, Federal Reserve Governor Adriana Kugler said: "I am cautiously optimistic that we will see continued progress on disinflation without significant deterioration of the labor market.”
- This week, the US Nonfarm Payrolls (NFP) data will provide a fresh outlook on the labor market. Before the official labor market data, investors will focus on the Automatic Data Processing (ADP) Employment Change data, which will be published on Wednesday. The expectations for fresh private payrolls are at 150K, higher than the prior reading of 107K.
- Meanwhile, the US Dollar fell sharply as the weak US ISM Manufacturing PMI for February suggests the strong US economy is releasing some heat. Going forward, the US ISM Services PMI, which will be published on Tuesday, will provide more guidance on economic prospects.
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