Huitong Financial APP News - On Friday (June 28) in the morning of the Asian market, spot gold fluctuated in a narrow range and is currently trading near $2327.31 per ounce. Gold prices rose more than 1%, or about $30, from a more than two-week low hit in the previous session on Thursday to close at $2,327.33 an ounce, as the dollar weakened and the market focused on key U.S. inflation data for clues on the Federal Reserve's policy path.
Phillip Streible, chief market strategist at Blue Line Futures, said: "Some of the data released is supportive for the gold market. Wholesale inventories were mainly lower than expected. The final value of the gross domestic product (GDP) is very low. As a result, gold futures were boosted when the dollar index retreated. ”
Data released on Thursday highlighted weakening economic momentum, with corporate spending on equipment falling in May and a widening merchandise trade deficit due to a decline in exports. The U.S. Department of Commerce's Bureau of Economic Analysis has released its third estimate of first-quarter GDP, confirming a sharp slowdown in economic growth in the first quarter.
The U.S. dollar fell as much as 0.33% to close at 105.92 on Thursday, while the yield on the 10-year Treasury fell to 4.289%, boosting gold's appeal to investors holding other currencies.
Although the Fed is expected to cut rates only once this year, investors have largely stuck to the view that it will cut rates about twice, according to FedWatch data from the London Stock Exchange Group (LSEG).
Personal consumption expenditures (PCE) price index data will be released on Friday, a key inflation report and a preferred inflation gauge for the Federal Reserve.
With the yen hovering near a 38-year low, markets are also wary of signs of Japanese authorities interfering with the yen. Economic uncertainty tends to increase gold's attractiveness.
(Spot gold daily chart, source: Yihuitong)
The jump in continuing jobless claims in the United States and the decline in business spending on equipment suggest that the economy is weakening
U.S. jobless claims fell last week, but continued jobless claims jumped to their highest level in two-and-a-half years in mid-June, suggesting that labor market conditions are loosening amid slowing economic growth.
Other data released on Thursday highlighted weaker economic momentum, with business spending on equipment falling in May and a widening merchandise trade deficit due to a decline in exports. After a sharp slowdown in economic growth in the first quarter, a slew of weak data increased the likelihood of a rate cut by the Fed in September.
Retail sales were tepid in May, and inflationary pressures weakened significantly. Economists don't think the data suggests an imminent recession.
Sal Guatieri, senior economist at Bank of Montreal Capital Markets, said: "The U.S. economy is on a soft landing trajectory, which is exactly what the Fed wants to see. ”
Initial claims for state unemployment benefits fell by 6,000 to a seasonally adjusted 233,000 in the week ended June 22, the Labor Department said. The above data includes last Wednesday's June Festival, which is a new public holiday.
The number of claims for unemployment benefits tends to fluctuate around public holidays. This volatility is expected to continue in the coming weeks, with automakers typically shutting down plants for annual maintenance after the Independence Day holiday on July 4.
Initial jobless claims have risen to the high end of this year's range of 19.4-243,000. Economists are divided on whether the recent rise in claims suggests an increase in layoffs or is a repeat of the same period last year.
The increase in claims is also due to a policy change that went into effect last year in Minnesota, which allows non-teaching educators to claim unemployment benefits during the summer.
In a separate report released Thursday, the U.S. government confirmed a sharp slowdown in economic growth in the first quarter. The U.S. Department of Commerce's Bureau of Economic Analysis released its third estimate of gross domestic product (GDP) for the first quarter, with GDP growth slightly revised upward to 1.4% annualized quarter-on-quarter. Q1 GDP grew at an annualized rate of 1.3% in the previous quarter. The economy grew by 3.4% in the fourth quarter of last year. While the pace of growth is likely to accelerate in the second quarter, it is likely not to exceed 1.8%, which Fed officials do not believe will lead to an acceleration in inflation
The upward revision of Q1 GDP growth at an annualized rate reflects an upward revision to corporate and government spending and a downward revision to imports. These factors overshadowed the impact of the downward revision in consumer spending.
The jobless benefits report showed that continuing claims for unemployment benefits rose by 18,000 in the week ended June 15 to a seasonally adjusted 1.839 million, the highest level since the end of November 2021. Economists cautioned against reading too much into the increase, noting that the upward trend in Minnesota claims is likely to fade when the new school year begins.
The above data on continued jobless claims are within the period of the government's survey of households on the unemployment rate in June.
Continuing jobless claims increased between the visiting weeks of May and June. The unemployment rate rose to 4.0% in May, the first time since January 2022. However, most economists do not believe that the current level of unemployment poses a danger to the labor market, and they believe that the rise in unemployment is mainly concentrated in the 35-44 age group, new immigrants and certain industries.
A report from the U.S. Department of Commerce's Bureau of Statistics showed that orders for nondefense capital goods other than aircraft fell 0.6% in May, compared with economists' expectations of a 0.1% increase and a 0.3% increase in April.
Fed's Bostic said inflation is moving in the right direction, expecting one rate cut in the fourth quarter
Atlanta Fed President Bostic said in a policy article published Thursday that inflation in the U.S. "looks to be slowing," which should allow the Fed to cut interest rates later this year.
After fearing that inflation could stagnate at a higher level, Bostic said recent data showed new developments, including that the share of goods and services whose prices had risen by more than 5% a year had fallen below 20%, which is closer to pre-pandemic levels and similar to last year's rapid slowdown.
"Inflation is moving in the right direction," Bostic said, citing the indicators as one of the Fed's tests against inflation that soared to a new 40-year high in 2022.
Personal consumption expenditures (PCE) inflation data for May will be released on Friday.
Bostic said that as things stand, "I still think the situation is likely to allow for a one-time cut in the federal funds rate in the fourth quarter of this year." In a subsequent comment to reporters, he said one reason to be "patient" with the first rate cut would be after inflation was clearly on the back track to the 2% target and could be considered the first in a series of rate cuts.
Investors expect rate cuts to begin in September and two 25 basis point cuts by the end of the year, while Bostic and many other Fed policymakers are now expecting one.
"I'm not locked into any particular policy path," Bostic said, "and in some cases that seem reasonable, more rate cuts, no rate cuts, or even rate hikes might be appropriate." I will be guided by the data and the actual situation. ”
He said recent employment and economic growth data suggest that "there will be an orderly deceleration in economic activity to restore the balance between supply and demand in the economy... This is really the 101 of economics. ”
Speaking at a press conference after the article's publication, he said businesses in his southeastern region still see inflation as a "major concern" and that most companies believe current levels of hiring and employment are sustainable.
Bostic said his sense is that there will be no "cliff" in the job market going forward, and that he believes the Fed will be able to ...... the labor market by historical standards is still tight" to achieve its inflation target. (ENDS)
Weak U.S. economic data dragged the dollar down
The U.S. dollar fell against most currencies on Thursday, weighed down by softer U.S. economic data that supported expectations that the Federal Reserve will start cutting interest rates this year.
Helen Given, a foreign exchange trader at Monex USA, said: "The market seems to be more focused on the weaker-than-expected personal consumption expenditures data than anything else, which is certainly a sign of a slowdown in the US economy." Q1 GDP was to be expected to be below hot levels, but downward revisions to consumer spending suggest a further slowdown is likely. ”
Given the continued weakening of the yen, the market needs to be wary of the possibility of another intervention by the Japanese authorities. Analysts said that while the risk of intervention has increased, the Japanese authorities may have to see the US personal consumption expenditures (PCE) price index released on Friday before entering the market. They say the effect of any intervention is likely to be limited.
Michael Boutros, senior FX analyst at Forex, said: "The Bank of Japan is known to like to act on Friday, but its best-case scenario would be ...... U.S. inflation has slowed sharply, further supporting calls for the Federal Reserve to cut interest rates this year. ”
Fed Governor Bowman: Not ready to support rate cuts until inflation eases significantly
Fed Governor Michelle Bowman reiterated on Thursday that she is not ready to support a rate cut amid still elevated inflationary pressures.
In a speech prepared for the 2024 annual meetings of the Bankers Associations of Idaho, Nevada, Oregon and Washington State, Bowman said the Fed's current interest rate stance remains "restrictive" and that price pressures should cool even if monetary policy remains at current levels.
"If future data suggests that inflation is continuing to move closer to our 2% target, then an eventual gradual reduction in the federal funds rate would be appropriate to prevent monetary policy from becoming too restrictive," Bowman said. "We're still not at a good position to lower the policy rate, and I still see some upside risks to inflation."
"I am still willing to raise the target range for the federal funds rate at future meetings if future data suggests that inflation progress has stalled or reversed," Bowman added. ”
This is broadly in line with her recent remarks on the economic and policy outlook. For now, Fed officials are looking for evidence that inflationary pressures are steadily coming back down towards the 2% target. Policymakers are now expecting one rate cut of 25 basis points this year, with many market participants expecting a rate cut at the September Federal Open Market Committee (FOMC) meeting.
Bowman said earlier this week that she doesn't think there will be a rate cut this year and that there is a possibility of policy easing next year.
Bowman said on Thursday that overall economic activity has been strong this year but has slowed and progress on inflation has stalled. She noted that the easing of financial conditions is creating challenges for the future direction of prices.
"There is also a risk that the easing of financial conditions since the end of last year, which reflects a sharp rise in equity valuations, and additional fiscal stimulus could add to demand momentum, hindering any further progress or even leading to a re-acceleration of inflation," she said. ”
Bowman also said that the reduction in the number of banks in the United States is a problem. At the same time, not enough new banks were born.
"In the long run, the lack of new banks will create a gap in the banking system that could lead to a decline in the supply of reliable and fairly priced credit, a lack of financial services in underserved markets, and a continued shift in banking activity outside the banking system," she said. ”
Looking ahead
After a sharp rebound in gold prices overnight, the uncertainty of the market outlook has increased significantly, and from the 4-hour level, the Bollinger Bands are running close to the level after closing, given the attention to the breakout of the Bollinger Bands track in the 2295.30-2342.01 area.