Daily Digest Market Movers: Gold price benefits from dovish Fed expectations, despite modest USD uptick
- The recent comments by Federal Reserve officials reaffirmed expectations of an interest rate cut in September, which continues to drive flows towards the non-yielding Gold price.
- Fed Chair Jerome Powell said on Monday that inflation readings during the second quarter showed more progress was being made on bringing the pace of price increases to the target.
- San Francisco Fed President Mary Daly showed growing confidence that inflation is heading toward the central bank's goal and added that she expects a policy adjustment at some point.
- Fed Governor Adriana Kugler noted on Tuesday that downside risks to employment have become more balanced and continued labor market rebalancing suggests inflation will move towards the target.
- Kugler further added that it will be appropriate to begin easing monetary policy later this year if economic conditions continue to evolve favorably and if the labor market cools too much.
- Traders are now pricing in multiple rate cuts by year-end, dragging the yield on the benchmark 10-year US government bond and the rate-sensitive 2-year Treasury yield to a multi-month low.
- Meanwhile, the US Dollar draws support from Tuesday's upbeat US Retail Sales data, which pointed to consumer resilience and bolstered economic growth prospects for the second quarter.
- The Census Bureau reported Retail Sales in the US remained unchanged in June and the previous month's revised higher to show a growth of 0.3% as compared to the 0.1% reported originally.
- This, along with an extension of a bullish run across the global equity markets, might hold back traders from placing fresh bullish bets around the safe-haven XAU/USD and cap gains.
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