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• GBP/USD fades late last week’s corrective bounce but lacks follow-through.
• Early signals of UK employment, growth flag concerns about British economy ahead of Q2 GDP.
• BoE’s inability to please Pound Sterling bulls with rate hikes, mostly upbeat US data tease sellers.
• Hawkish Fed talks, cautious mood before US inflation gauges also weigh on Cable pair.

GBP/USD justifies market’s fears about UK employment and growth conditions as it retreats to 1.2745 amid Monday’s sluggish Asian session, following a three-week downtrend. In doing so, the Cable pair also justifies hawkish bias about the Federal Reserve (Fed), as well as the Bank of England’s (BoE) failure to please optimists despite fueling interest rates to multi-year high. Furthermore, a cautious mood ahead of the first readings of the UK’s second quarter Gross Domestic Product (GDP) and the US inflation numbers also keep the Pound Sterling sellers hopeful.

The latest outcome of the UK’s Recruitment and Employment Confederation (REC), funded by the global quant giant KPMG, revealed downbeat employment conditions in Britain due to the economic pessimism. “British employers reduced the number of new permanent staff they hired through recruitment agencies by the most since mid-2020 last month due to concerns about the economic outlook,” said the KPMG/REC poll.

In the last week, the Bank of England (BoE) matched market forecasts by lifting the benchmark interest rates to the highest level in 15 years with a 0.25% increase to 5.25%. However, the policymakers appear divided with most favoring the latest move and a few backing a 0.50% rate hike while one BoE voting member backed no rate hike.

Following the BoE Interest Rate Decision, Governor Andrew Bailey spoke at the press conference and ruled out the case for a 50 basis point rate rise in the latest meeting. Further, BoE Governor Bailey also conveyed expectations of witnessing softer inflation, as well as the hopes to deliver the path they expect with no recession while adding, “We will have to see." It’s worth noting that BoE Governor also mentioned, “Projection for economic activity has weakened since May.”

The same contrasts with the recently hawkish comments from Federal Reserve (Fed) Governor Michelle Bowman as she said during the weekend that the Fed should remain willing to raise the federal funds rate at a future meeting if the incoming data indicate that progress on inflation has stalled. Previously, Atlanta Federal Reserve Bank President Raphael Bostic said on Friday to Bloomberg, that the central bank is likely to keep monetary policy in a restrictive territory well into 2024. On the contrary, Chicago Fed President Austan Goolsbee stated that they should start thinking about how long to hold rates.

It should be noted that the US employment report posted a softer-than-expected Nonfarm Payrolls (NFP) figure of 187K, versus 185K prior (revised) and 200K market forecasts, whereas the Unemployment Rate eased to 3.5% from 3.6% expected and previous readings. Further, the Average Hourly Earnings reprinted 0.4% MoM and 4.4% YoY numbers by defying the expectations of witnessing a slight reduction in wage growth.

Also notable is the fact that the ISM Manufacturing PMI for July improved a bit but the more important Services PMI dropped for the said month. Additionally, US Factory Orders edged higher for June and so did the second-tier employment-linked data like Nonfarm Productivity and JOLT Job Openings. However, the Q2 Unit Labor Cost eased and troubled favoring the Fed’s September rate hike.

Additionally, the market’s bets on the Fed’s September rate hike eased from 20.0% to 13% on a weekly basis, per the CME’s FedWatch Tool.

To sum up, the fears of the UK’s economic slowdown and labor market crunch weigh on the Cable pair ahead of the top-tier data/events. It’s worth noting that the latest easing in the US Treasury bond yields, however, puts a floor under the Pound Sterling as this week’s US inflation numbers, namely the Consumer Price Index (CPI) and Producer Price Index (PPI) for July loom.

Technical analysis

A three-week-old descending trend channel, currently between 1.2850 and 1.2600, keeps the GBP/USD sellers hopeful amid bearish MACD signals and steady RSI (14) line.

• USD/CHF gains traction around 0.8742, up 0.19% for the day.
• The July employment and wage inflation report on Friday showed mixed results.
• President Joe Biden is likely to announce an executive order restricting US investments in China.
• Market players will focus on the Swiss Employment Rate and the US CPI for July.

The USD/CHF pair recovers some lost ground and surges above the 0.8740 mark during the early Asian session on Monday. Meanwhile, the US Dollar Index (DXY), a measure of the value of USD against six other major currencies, bounces off the 101.75 mark and currently trades near 102.05.

The US Dollar faced some selling pressure following the release of the July employment and wage inflation report on Friday. That said, the US Nonfarm Payrolls in the US rose by 187,000 in July, the US Bureau of Labor Statistics (BLS) reported on Friday. This figure was weaker than the market's expectation of 200,000. The June figures were revised lower to 185,000, the lowest reading since December 2020.

Furthermore, the unemployment rate fell to 3.5% from 3.6%, while annual wage inflation, as measured by changes in Average Hourly Earnings, came in at 4.4%, higher than the market estimation of 4.2%. The Labour Force Participation remained unchanged at 62.6%, while the U6 Unemployment Rate declined to 6.7%.

The mixed readings did not change economists’ anticipation about the Federal Reserve's stance. However, it would depend on the trajectory of inflation. According to the CME FedWatch tool, the probability of a 25 basis point (bps) hike in September remains steady, but the odds of a hike in November have increased slightly to approximately 30%.

On the other hand, investors will keep an eye on the US-China relationship. The US President Joe Biden is expected to issue an executive order to restrict US investments in China in the high-tech sector, artificial intelligence, semiconductors, and quantum computing this week, according to Reuters.  The exacerbated tensions between the world’s two largest economies might benefit the safe-haven Swiss Franc and act as a headwind for the USD/CHF pair.

Moving on, market players will focus on the Swiss Employment Rate due later on Monday. The figure is expected to remain unchanged at 2.0%. Later this week, the US Consumer Price Index (CPI) for July will be due on Thursday. Market expectations anticipate a 0.2% monthly increase. Also, the US Produce Price Index (PPI) will be released on Friday. Market participants will keep an eye on the data and find trading opportunities around the USD/CHF pair.

• EUR/USD retreats from one-week high, snaps two-day winning streak.
• Mostly hawkish comments from Fed officials, unimpressive Eurozone statistics to weigh on Euro pair.
• Light calendar in the bloc, presence of US inflation weigh on Euro price amid cautious mood.
• US CPI, PPI eyed for clear directions, second-tier data from Eurozone/Germany may entertain traders.

EUR/USD begins the key inflation week on a back foot, after rising in the last two consecutive days, as sellers attack the 1.1000 psychological magnet during early hours of Monday’s Asian session. In doing so, the Euro pair retreats from a three-week-old falling resistance line amid fears of the European Central Bank’s (ECB) peak rates, as well as hawkish concerns about the Federal Reserve (Fed) as the key US inflation data loom.

The chatters about the ECB peak rates were triggered by the global rating agency Fitch Ratings as it said on Friday that the falling Eurozone inflation puts ECB rates peak within sight. On the same line was the European Central Bank (ECB) article which stated that the “underlying inflation likely peaked in the first half of 2023.”

It should be noted that the Eurozone statistics were mixed in the last week, suggesting easy inflation conditions in the bloc, which in turn backed the dovish concerns about the old continent’s central bank. That said, preliminary readings of Eurozone inflation, per the Harmonised Index of Consumer Prices (HICP), eased in July whereas the Eurozone Gross Domestic Product (GDP) for the second quarter (Q2) of 2023 rose. Further, the bloc’s Producer Price Index (PPI) for June dropped to the lowest level in three years. Additionally, Eurozone Retail Sales for June came in mixed as MoM figures deteriorated to -0.3% MoM versus 0.2% expected and 0.6% prior but the yearly growth improved to -1.4% YoY compared to -1.7% market forecasts and -2.4% previous readings.

On the other hand, Federal Reserve (Fed) Governor Michelle Bowman said during the weekend that the Fed should remain willing to raise the federal funds rate at a future meeting if the incoming data indicate that progress on inflation has stalled. Previously, Atlanta Federal Reserve Bank President Raphael Bostic said on Friday to Bloomberg, that the central bank is likely to keep monetary policy in a restrictive territory well into 2024. On the contrary, Chicago Fed President Austan Goolsbee stated that they should start thinking about how long to hold rates.

Talking about the US data, , the headline US employment report posted a softer-than-expected Nonfarm Payrolls (NFP) figure of 187K, versus 185K prior (revised) and 200K market forecasts, whereas the Unemployment Rate eased to 3.5% from 3.6% expected and previous readings. Further, the Average Hourly Earnings reprinted 0.4% MoM and 4.4% YoY numbers by defying the expectations of witnessing a slight reduction in wage growth.

Also notable is the fact that the ISM Manufacturing PMI for July improved a bit but the more important Services PMI dropped for the said month. Additionally, US Factory Orders edged higher for June and so did the second-tier employment-linked data like Nonfarm Productivity and JOLT Job Openings. However, the Q2 Unit Labor Cost eased and troubled favoring the Fed’s September rate hike.

Considering these data, the market’s bets on the Fed’s September rate hike eased from 20.0% to 13% on a weekly basis, per the CME’s FedWatch Tool.

Amid these plays, the US Treasury bond yields eased from multi-day high and allowed the EUR/USD to pare some of the weekly losses before the latest retreat.

Looking ahead, this week’s US inflation numbers, namely the Consumer Price Index (CPI) and Producer Price Index (PPI) for July for clear directions.

Technical analysis

EUR/USD pair’s latest pullback could be linked to its failure to cross a three-week-old descending resistance line, around 1.1010 at the latest, which in turn joins the bearish MACD signals to direct sellers toward the 100-DMA retest, close to 1.0925 by the press time.

“British employers reduced the number of new permanent staff they hired through recruitment agencies by the most since mid-2020 last month due to concerns about the economic outlook, per the latest survey from the UK’s Recruitment and Employment Confederation (REC), funded by the global quant giant KPMG, published early Monday in Asia.  

The poll also cited a tough market for job seekers as their key gauge showing the permanent staff hiring slumped to 43.4, the lowest since June 2020, in July. That said, the survey's measure of temporary staff hiring marked the weakest growth in nine months for the said month.

In addition to the survey release, Neil Carberry, chief executive of REC, cited economic uncertainty as the catalyst for the latest challenges for the jobs market.

The news also includes a separate survey from the UK BDO stating that the rising interest rates, tough trading conditions and weak demand hit hiring intentions and business confidence across services and manufacturing sectors. While justifying the same, the BFO’s gauge of employment snapped a five-week uptrend in July while the optimism inflation marked the first monthly loss in four during the said month.

Also read: GBP/USD Weekly Forecast: Bearish potential to hold in a key week ahead

• NZD/USD consolidates in a narrow trading band through the early Asian session on Monday.
• The US wage inflation and employment data showed mixed results on Friday.
• The Federal Reserve (Fed) is likely to maintain tightening monetary policy far beyond 2024.
• The US Consumer Price Index (CPI) for July will be the key event to watch this week.

The NZD/USD pair oscillates in a narrow range below the 0.6100 mark during the early Asian session on Monday. Meanwhile, the US Dollar Index (DXY), a measure of the value of USD against six other major currencies, faces some follow-through selling and currently trades near 102.05.

The US Dollar fell following the mixed employment data on Friday. The US Bureau of Labor Statistics (BLS) reported on Friday that the Nonfarm Payrolls in the US rose by 187,000 in July, weaker than the market expectation of 200,000. The June figures were revised lower to 185,000, the lowest reading since December 2020.

Additionally, the unemployment rate fell to 3.5% from 3.6%, while annual wage inflation, as measured by changes in Average Hourly Earnings, came in at 4.4%, higher than the market estimation of 4.2%. Finally, the Labour Force Participation remained unchanged at 62.6%.

Atlanta Federal Reserve Bank President Raphael Bostic told Bloomberg on Friday that the central bank is likely to maintain tightening monetary policy far beyond 2024. According to the CME FedWatch tool, the probability of a 25 basis point (bps) hike in September remains steady, but the odds of a hike in November have increased slightly to approximately 30%.

On the Kiwi front, no top-tier economic data was released on Friday. However, Statistics New Zealand reported on Wednesday that the New Zealand Unemployment Rate for Q2 came in at 3.6%, above the consensus of 3.5% and 3.4% prior. Employment Change QoQ rose 1.0%, better than expected at 0.5% and 0.8% previously.

Looking ahead, market participants will watch the US Consumer Price Index (CPI) for July, which is due on Thursday. Market expectations anticipate a 0.2% monthly increase. Also, the US Produce Price Index (PPI) will be released on Friday. The inflation data could significantly impact the US Dollar's dynamic and give the NZD/USD pair a clear direction.

“We should remain willing to raise the federal funds rate at a future meeting if the incoming data indicate that progress on inflation has stalled,” per Federal Reserve (Fed) Governor Michelle Bowman’s remarks prepared for delivery to the Kansas Bankers Association, released Saturday, per Reuters.

Further, the policymaker praised the latest decline in the core inflation while also defending the hawkish Fed bias by stating that, “inflation remains well above target”.

Fed’s Bowman also cited the need for consistent evidence that inflation is on a meaningful path down toward our 2% goal to determine the strength of rate hikes, as well as the duration for holding rates intact at the higher levels.

Apart from inflation, the softer consumer spending and easing labor market crunch were also cited as welcome catalysts by Fed’s Bowman.

Fed’s Bowman didn’t seem any sharp contraction in the US credit conditions after March’s banking turmoil.

Market reaction

The hawkish comments allowed EUR/USD to begin the week on a back foot around 1.1000, down 0.05% intraday, after falling in the last three consecutive weeks.

• AUD/USD defends the previous day’s corrective bounce despite posting muted start of week’s trading.
• Shift in risk aversion wave, mixed US data and hawkish RBA MPS allowed Aussie to pare recent losses.
• US credit rating downgrade, fears of slowing growth in China joined RBA’s status quo to push AUD/USD toward three-week downtrend.
• US CPI, Australia Consumer Inflation Expectations eyed as Fed, RBA stays ready to lift the rates if needed.

AUD/USD kick-starts the inflation week with no major changes, making rounds to around 0.6570, defending the last two days’ corrective bounce off the key support line during the early Asian session on Monday. In doing so, the Aussie pair justifies the market’s cautious mood ahead of the top-tier inflation clues from Australia and the US, as well as the lack of major data/events during the weekend. It’s worth noting that the Aussie pair marked a three-week downtrend despite recovering in the last two consecutive days.

The Aussie pair’s latest rebound could be linked to the mixed US data and upbeat statements from the Reserve Bank of Australia (RBA). However, fears emanating from the US credit rating downgrade by Fitch Ratings and China’s economic worries, despite announcing multiple stimulus measures, prod the Aussie buyers ahead of the key inflation data.

During the last week, the Reserve Bank of Australia (RBA) defied market forecasts by keeping the benchmark rates intact at 4.1%, marking the second consecutive status quo after challenging the two hawkish surprises in the last monetary policy meeting in July.  However, the Aussie central bank’s rate statement, presented by Governor Phillip Lowe, mentioned, “Some further tightening of monetary policy may be required to ensure that inflation returns to target in a reasonable timeframe, but that will depend upon the data and the evolving assessment of risks.” Furthermore, the RBA’s quarterly print of the Monetary Policy Statement (MPS) confirmed the Aussie central bank’s hawkish bias by suggesting the need for further tightening. “Trims GDP growth and inflation forecasts for end 2023, most others little changed,” said the RBA statement.

On the other hand, the headline US employment report posted a softer-than-expected Nonfarm Payrolls (NFP) figure of 187K, versus 185K prior (revised) and 200K market forecasts, whereas the Unemployment Rate eased to 3.5% from 3.6% expected and previous readings. Further, the Average Hourly Earnings reprinted 0.4% MoM and 4.4% YoY numbers by defying the expectations of witnessing a slight reduction in wage growth.

Also notable is the fact that the ISM Manufacturing PMI for July improved a bit but the more important Services PMI dropped for the said month. Additionally, US Factory Orders edged higher for June and so did the second-tier employment-linked data like Nonfarm Productivity and JOLT Job Openings. However, the Q2 Unit Labor Cost eased and troubled favoring the Fed’s September rate hike.

Considering these data, the market’s bets on the Fed’s September rate hike eased from 20.0% to 13% on a weekly basis, per the CME’s FedWatch Tool.

With this in mind, Atlanta Federal Reserve Bank President Raphael Bostic said on Friday to Bloomberg, that the central bank is likely to keep monetary policy in a restrictive territory well into 2024. On the contrary, Chicago Fed President Austan Goolsbee stated that they should start thinking about how long to hold rates.

Elsewhere, China’s Caixin Manufacturing PMI improved but the Services PMI eased in July while the policymakers tried to placate bears by announcing several stimulus measures to defend the economy.

To sum up, most of the United States statistics have been mixed and may not be the key reason for the US Dollar Index (DXY) run-up, which in turn highlights the Fitch Ratings’ downward revision to the US credit rating from AAA to AA+. The same joins the US-China tension and mixed earnings from the US corporate giants to spoil the sentiment and weigh on the AUD/USD price.

Moving on, this week’s US inflation numbers, namely the Consumer Price Index (CPI) and Producer Price Index (PPI) for July for clear directions. Also important to watch will be Australia’s Consumer Inflation Expectations for August. Should the inflation numbers from Canberra improve and the US CPI/PPI ease, the AUD/USD may have a reason to extend the latest rebound from the key support.

Technical analysis

AUD/USD recovery could be linked to the inability to break a 10-month-old rising support line, around 0.6540 by the press time and the nearly oversold RSI (14) line. However, a daily closing beyond the lows marked in late June and early July, close to 0.6600, becomes necessary to convince buyers.

• Gold Price bounces off multi-month-old support line as US Dollar ended three-week uptrend on a softer note.
• Downbeat sentiment provides tailwind to US Dollar even as mixed United States data, US credit rating downgrade prod Fed hawks.
• US inflation will be crucial amid easing concerns about Federal Reserve’s September rate hike, downbeat CPI can propel XAU/USD rebound.

Gold Price (XAU/USD) begins the week comprising the key United States inflation without much surprises as it defends the previous day’s corrective bounce off an important support line, mainly backed by mixed US employment report, during early Monday in Asia. In doing so, the XAU/USD seesaws near $1,943, flirting with the 50-DMA hurdle by the press time.

That said, the Gold Price dropped in the last two consecutive weeks, marking the biggest weekly loss since mid-June, as the US Dollar Index (DXY) managed to print a three-week uptrend despite witnessing mixed data and easing concerns about the Federal Reserve’s (Fed) rate hike in September. The reason could be linked to the risk aversion wave, mainly backed by the Fitch Ratings’ US credit rating downgrade. With this, the Gold traders are more excited about this week’s US inflation numbers, namely the Consumer Price Index (CPI) and Producer Price Index (PPI) for July for clear directions.

Gold Price recovery appears elusive as US Dollar ignores indecision about Federal Reserve

US Dollar managed to post a three-week winning streak as the market’s risk-off tone superseded unimpressive United States data, which in turn exerted downside pressure on the Gold Price despite Friday’s corrective bounce.

Talking about the data, the headline employment report posted a softer-than-expected Nonfarm Payrolls (NFP) figure of 187K, versus 185K prior (revised) and 200K market forecasts, whereas the Unemployment Rate eased to 3.5% from 3.6% expected and previous readings. Further, the Average Hourly Earnings reprinted 0.4% MoM and 4.4% YoY numbers by defying the expectations of witnessing a slight reduction in wage growth.

Also notable is the fact that the ISM Manufacturing PMI for July improved a bit but the more important Services PMI dropped for the said month. Additionally, US Factory Orders edged higher for June and so did the second-tier employment-linked data like Nonfarm Productivity and JOLT Job Openings. However, the Q2 Unit Labor Cost eased and troubled favoring the Fed’s September rate hike.

Earlier in July, the Federal Reserve’s (Fed) preferred inflation gauge eased previously but the US Gross Domestic Product (GDP) Annualized for the second quarter (Q2) managed to impress with upbeat growth figures.

Considering these data, the market’s bets on the Fed’s September rate hike eased from 20.0% to 13% on a weekly basis, per the CME’s FedWatch Tool.

With this in mind, Atlanta Federal Reserve Bank President Raphael Bostic said on Friday to Bloomberg, that the central bank is likely to keep monetary policy in a restrictive territory well into 2024. On the contrary, Chicago Fed President Austan Goolsbee stated that they should start thinking about how long to hold rates.

Hence, most of the United States statistics have been mixed and may not be the key reason for the US Dollar Index (DXY) run-up, which in turn highlights the Fitch Ratings’ downward revision to the US credit rating from AAA to AA+. The same joins the US-China tension and mixed earnings from the US corporate giants to spoil the sentiment and the Gold Price.

XAU/USD bulls need validation from United States inflation data

While mixed feelings provided headwinds to the Gold Price, important support and decline in Friday’s US Nonfarm Payrolls (NFP), as well as consolidation of the weekly losses in equities, allowed the metal to recover. Also, a pullback in the US 10-year Treasury bond yields from the yearly high helped the XAU/USD to rebound without impressively downbeat US data. Hence, Gold traders will pay attention to this week’s United States inflation clues for July, via the CPI, PPI and the University of Michigan’s inflation expectations. Should the scheduled data suggest easing price pressure in the world’s largest economy, the Gold Price may rise further toward the key $1,960 hurdle.

Also read: Gold Price Weekly Forecast: Bulls and bears in tug-of-war ahead of US inflation data

Gold Price Technical Analysis

Gold Price recovers from an upward-sloping support line from late November 2022, backed by an upswing in the Relative Strength Index (RSI) line, placed at 14.

Even so, the bearish signals from the Moving Average Convergence and Divergence (MACD) indicator joined the 50-DMA hurdle of near $1,945 to check the XAU/USD bulls.

With this, the Gold Price appears well-set to extend the latest rebound past the $1,945 immediate DMA hurdle. However, a three-month-long downward-sloping resistance line challenges the buyers around $1,960.

That said, a daily closing beyond the $1,960 hurdle will enable the Gold Price to rise toward the previous monthly high of around $1,987 ahead of highlighting the $2,000 psychological magnet on the bull’s radar.

Meanwhile, failure to provide successful trading beyond the 50-DMA hurdle of around $1,945 can drag the XAU/USD back to the aforementioned support line of around $1,933 at the latest.

Following that, the $1,900 threshold may check the Gold sellers before directing them to the key $1,895-93 support confluence comprising the 200-DMA and June’s low.

Overall, the Gold Price is likely to witness further recovery but the upside appears limited.

Gold Price: Daily chart

Trend: Limited recovery expected