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"The knock-on effects of the surge in prices - such as pressure on employers to push up wages, which has led to record growth in pay - were unlikely to fade away as rapidly as they emerged," said Bank of England (BoE) Deputy Governor Ben Broadbent while speaking at the annual Jackson Hole Symposium on Saturday per Reuters.

With this, the policymaker cites the need for monetary policy to remain in restrictive territory for some time yet.

BOE’s Broadbent highlights the evidence on spare capacity, and indicators of domestic inflation, as and when it comes through, as the catalysts for the British central bank’s stance on interest rates.

The policymaker signaled expectations of witnessing softer energy and core goods prices over the next few months but also warned about being cautious amid higher wages.

Additionally, BoE’s Broadbent cites the British economic shock as an illustration of how a sudden contraction in the supply of imported goods could hurt incomes and turn up the pressure on domestic inflation, chiefly via wage increases.

Also read: GBP/USD Weekly Forecast: Pound Sterling yields a range breakdown ahead of US Nonfarm Payrolls

• EUR/USD lacks clear directions after declining in the last six consecutive weeks.
• Fed’s Powell defends hawkish monetary policy moves, showed readiness for more rate hikes if needed.
• ECB’s Lagarde cites inflation woes to keep rates sufficiently restrictive for as long as necessary.
• Escalating economic pessimism about Eurozone favors Euro bears ahead of key inflation, employment data from EU, US.

EUR/USD licks its wound at the lowest level in 13 weeks while making rounds to 1.0800 during the early hours of Monday’s Asian session. In doing so, the Euro pair justifies the cautious optimism of the policymakers at the Federal Reserve (Fed) and the European Central Bank (ECB), per the latest speeches at the Jackson Hole Symposium. Also challenging the major currency pair’s latest moves could be the anxiety ahead of this week’s top-tier Eurozone and the US inflation clues, as well as the monthly US employment report. It’s worth noting, however, that the comparatively downbeat economic outlook for the Eurozone weighs on the quote of late.

The downbeat prints of Germany’s IFO sentiment gauges joined unchanged estimations for the nation’s second quarter (Q2) of 2023 Gross Domestic Product (GDP) to portray economic weakness in the bloc.

With this in mind, President Christine Lagarde flagged the need to set interest rates sufficiently restrictive for as long as necessary to achieve a timely return of inflation to the 2% medium-term target. ECB’s Lagarde also added that the fight against inflation "is not yet won."

On the same line, ECB Governing Council member Martins Kazaks termed the current interest rates as restrictive while also stating that prematurely stopping monetary policy tightening could present a larger problem compared to rate cuts. 

Additionally, Reuters quoted anonymous sources with knowledge of the discussion to mention that the momentum is growing for a pause in the ECB rate hikes as recession fears rise but the debate is still open.

Elsewhere, the softer prints of the US Purchasing Managers Index and Michigan Consumer Sentiment Index contrasted with mixed details of Durable Goods Orders, mid-tier activity data and inflation expectations. However, hawkish comments from Federal Reserve (Fed) Chairman Jerome Powell at the annual Jackson Hole Symposium helped the US Dollar Index (DXY) to post the fifth consecutive weekly gain while poking the three-month high.

That said, Fed’s Powell reiterated his defense for “higher for longer” rates while stating that the policy is restrictive but the Fed can’t be certain what the neutral rate level is. The policymaker also added that there is substantial further ground to cover to get back to price stability while also stating that the economic uncertainty calls for agile monetary policy-making.

Not only Fed Chair Powell but also President of the Federal Reserve Bank of Cleveland Loretta J. Mester also appeared hawkish while warning that the under-tightening would be worse than overtightening. The policymaker also added, “We are getting close to where we need to be with rates.”

Amid these plays, the US Dollar Index (DXY) managed to rise for the fifth consecutive week but the benchmark 10-year Treasury bond yields snapped the four-week uptrend by posting minor weekly losses as it retreated from the highest level since 2007.

Looking forward, the preliminary inflation data for August from the Eurozone and Germany will be crucial for the EUR/USD pair traders to watch. Also important will be the Federal Reserve’s (Fed) favorite inflation gauge, namely the Core Personal Consumption Expenditure (PCE) Price Index for July, and the monthly employment data.

Also read: EUR/USD Weekly Forecast: Central banks walking at the edge of a cliff

Technical analysis

EUR/USD bounces off an ascending support line from March 15, around 1.0770 by the press time, despite staying below the 200-DMA surrounding 1.0810 for the first time since November 2022.

Weekend headlines from China appear mixed as the Dragon Nation tried to bolster economic activity via another stimulus measures but lacked a positive response from the markets amid fears about an economic slowdown. Also, the cautious mood ahead of the US-China talks in Beijing, as US Commerce Secretary Gina Raimondo visits Beijing for four days, prods the optimists.

China cuts stamp duty on stocks trade

China Finance Ministry confirmed the previous expectations of cutting the stamp duty of 0.1% on stocks trading to half "in order to invigorate the capital market and boost investor confidence".

Additionally, the China Securities Regulatory Commission (CSRC) is rolling out measures to shore up market confidence in investing in listed companies. The CSRC signaled a slowing  downbeat pace of Initial Public Offerings (IPOs) and regulated major shareholders' share reductions to defend the equities markets from volatility.

China Industrial Profits for July dropped for seventh month

China’s Industrial Profits for July dropped 6.7% YoY and -15.5% for the first seven months of 2023 compared to the same period last year, per the weekend news shared via Reuters. It’s worth noting that the Industrial Profits were -8.3% in June.

Further details of the report state that the profits dived for 28 of 41 major industrial sectors, led by the ferrous metal smelting and rolling processing industry which reported the deepest slump at 90.5%.

US Commerce Secretary Raimondo rejects discussng American national security trade measures

US Commerce Secretary Gina Raimondo landed in Beijing on Sunday for a four-day diplomatic visit.

While departing for China, the policymaker clearly stated in the US, per Reuters, that she would promote discussions on boosting trade and tourism ties with China while crossing out discussions on the American national security trade measures.

"If you wanted to put a tagline to the trip and the mission, it’s protecting what we must and promote where we can," said US Commerce Secretary Raimondo per Reuters.

US Commerce Secretary Raimondo will hold bilateral meetings with Chinese officials on Monday and Tuesday in Beijing before she heads to Shanghai. She will be joined by U.S. Ambassador to China Nicholas Burns reported Reuters.

Even so, the policymaker showed readiness for regular communication to have a stable commercial relationship and avoid conflicts.

Important reads

• AUD/USD stays defensive near 0.6400 amid mixed concerns about China, Australia Retail Sales eyed 
• Australian Treasurer Chalmers: Closely watching concerning signs of China’s economic weakness

• NZD/USD remains under selling pressure near a monthly low of around 0.5907.
• The Federal Reserve (Fed) Chairman Jerome Powell stated that they are preparing to raise interest rates further, if necessary.
• The UoM Consumer Confidence Index (Aug) fell to 69.5 from 71.6 in July.
• Market players await the US Nonfarm Payrolls, inflation data ahead of the September FOMC meeting.

The NZD/USD pair recovers some lost ground above the 0.5900 mark but remains under pressure near the monthly low during the early Asian session on Monday. The US economy's strength continues to support the US Dollar. NZD/USD currently trades around 0.5907, gaining 0.08% on the day.

The Federal Reserve (Fed) Chairman Jerome Powell said at the Jackson Hole Economic Symposium that the central bank is prepared to raise interest rates further, if necessary, and will determine the next rate move based on data. Powell indicated that the strong economic growth and tight labor market conditions might pave the way for further tightening cycle. If the data do not show indications of softening, additional rate rises would be appropriate.

Philadelphia Fed President Patrick Harker stated that he does not see the need for additional rate hikes at this time and the Fed should hold rates steady and observe the impact of policy on the economy. Meanwhile, Cleveland Fed President Loretta Mester said that GDP and labor market data show that the economy is gaining momentum. She emphasized that the current rates are not restrictive enough to reach the inflation target and a lower growth rate would be essential to moderate inflation.

About the data on Friday, the University of Michigan's (UoM) Consumer Confidence Index for August fell to 69.5 from 71.6 in July and was revised from the first reading of 71.2. Additionally, The Current Conditions Index dropped from 76.6 to 75.7 (revised from 77.4), while the Expectations Index fell from 68.3 to 65.5 (revised from 67.3).

On the other hand, the headlines surrounding Chinese economic woes weigh on the China-proxy Kiwi. That said, the Chinese government has promised aid for the property market, but its efforts have so far failed to restore investor confidence. The chief economist of the Reserve Bank of New Zealand (RBNZ) said last week that policymakers would lower the OCR sooner than we have signaled if China experienced a more significant deceleration than the RBNZ anticipates.

Looking ahead, market participants will shift their focus to the economic data. The US Nonfarm Payrolls and inflation data will be the highlight ahead of the September FOMC meeting. Also, the Chinese Purchasing Managers' Indexes (PMI) will be in focus. The data will be critical for determining a clear movement for the NZD/USD pair.

• AUD/USD remains sidelined after barely defending six-week losing streak.
• China halves stamp duty on stocks trade to boost economy, industrial profits drop for seven consecutive month.
• Australia Treasurer Chalmers flags economic fears due to RBA rate hike, China slowdown.
• Australia Retail Sales will direct intraday traders amid mixed central bank clues but US inflation, employment data will be this week’s highlight.

AUD/USD begins the trading week on a defensive mode around 0.6400 as it justifies the mixed clues surrounding major customer China ahead of top-tier data at home. That said, China’s stimulus and the US-China trade talks contrast with the growing fears of witnessing the economic slowdown in Beijing to confuse the Aussie pair traders, especially amid the pre-data anxiety.

During the weekend, China halved its stamp duty on stock trade to offer another boost to the economic activity after witnessing a seventh consecutive fall in Industrial Profits, down 6.7% in July from a year earlier and -15.5% for the first seven months of 2023 compared to the same period the last year.

It’s worth noting that US Commerce Secretary Gina Raimondo’s visit to Beijing appears flashing positive signs initially as the policymaker seeks trade and tourism boosts in her talks with Chinese authorities, per Reuters.

Elsewhere, Australian Treasurer Jim Chalmers flagged expectations of witnessing substantially weaker Australian growth due to higher interest rates from the Reserve Bank of Australia (RBA) and China's slowdown.

On a different page, the softer prints of the US Purchasing Managers Index and Michigan Consumer Sentiment Index contrasted with mixed details of Durable Goods Orders, mid-tier activity data and inflation expectations. However, hawkish comments from Federal Reserve (Fed) Chairman Jerome Powell at the annual Jackson Hole Symposium helped the US Dollar Index (DXY) to post the fifth consecutive weekly gain while poking the three-month high.

On Friday, Fed’s Powell reiterated his defense for “higher for longer” rates while stating that the policy is restrictive but the Fed can’t be certain what the neutral rate level is. The policymaker also added that there is substantial further ground to cover to get back to price stability while also stating that the economic uncertainty calls for agile monetary policy-making.

Not only Fed Chair Powell but also President of the Federal Reserve Bank of Cleveland Loretta J. Mester also appeared hawkish while warning that the under-tightening would be worse than overtightening. The policymaker also added, “We are getting close to where we need to be with rates.”

Looking forward, headlines surrounding China can keep entertaining the AUD/USD pair traders while Australia’s Retail Sales for July, expected 0.3% versus -0.8% prior, will be important to watch for intraday directions. However, major attention will be given to this week’s inflation clues from the US and Australia, as well as the US employment report for August.

Technical analysis

A downward-sloping support line from early March, around 0.6350 by the press time, restricts the immediate downside of the AUD/USD pair even if a six-week-old falling resistance line, close to 0.6430 by the press time, restricts the Aussie pair’s rebound.

"It is concerning to see the weakness, the softness, in the recent weeks and months in the Chinese economy because it has obvious implications for us here in Australia,” said Australian Treasurer Jim Chalmers to Sky News television on Sunday per Reuters.

The news also quotes the Aussie policymaker as flagging substantial concerns about people voicing about Chinese economy.

Australian Treasurer Chalmers cites China’s slower growth, deflation, problems with property and banking sector, as well as softer exports growth, as the key concerns while also stating, “Our concerns for China in particular is something that we're monitoring very closely.”

More to come...

• Gold Price stays defensive within multi-day-old falling wedge after snapping four-week downtrend.
• Mixed United States data, pullback in Treasury bond yields lure XAU/USD buyers within bullish chart pattern.
• Federal Reserve Chairman Jerome Powell, other policymakers defend hawkish bias but cite data dependency to prod Gold bears.
• Fed’s preferred inflation gauge, NFP will guide US Dollar and can favor XAU/USD rebound on downbeat outcomes.

Gold Price (XAU/USD) edges higher to around $1,915 as it defends the first weekly gain in five while marking no major surprises to begin the trading week. That said, the XAU/USD cheered a pullback in the United States Treasury bond yields, as well as the mixed statements from the major central bank officials at the annual Jackson Hole Symposium, to recall the buyers after their four-week absence. However, the cautious mood ahead of this week’s top-tier inflation and employment clues from the United States prods the Gold Price upside amid the initial hour of Monday’s Asian session.

Gold Price recovers even as Powell’s speech defends hawks

Gold Price cheered a pullback in the United States Treasury bond yields despite hawkish Federal Reserve (Fed) remarks in the last week. Additionally, mixed US data also allowed the XAU/USD buyers to remain hopeful.

During the last week, the softer prints of the US Purchasing Managers Index and Michigan Consumer Sentiment Index contrasted with mixed details of Durable Goods Orders, mid-tier activity data and inflation expectations. However, hawkish comments from Federal Reserve (Fed) Chairman Jerome Powell at the annual Jackson Hole Symposium helped the US Dollar Index (DXY) to post the fifth consecutive weekly gain while poking the three-month high.

That said, Fed’s Powell reiterated his defense for “higher for longer” rates while stating that the policy is restrictive but the Fed can’t be certain what neutral rate level is. The policymaker also added that there is substantial further ground to cover to get back to price stability while also stating that the economic uncertainty calls for agile monetary policy-making.

Apart from Powell’s speech, the comments of Federal Reserve Bank of Cleveland President Loretta J. Mester also appeared hawkish as she warned that the under-tightening would be worse than overtightening. The policymaker also added, “We are getting close to where we need to be with rates.”

Further, Federal Reserve Bank of Philadelphia President Patrick Harker told Bloomberg that he doesn't see the need now for additional rate increases but added that he could call for more hikes if inflation retreat stalled.

It should be noted that the policymakers from the rest of the major central banks, including the European Central Bank (ECB), Bank of England (BoE) and the Bank of Japan (BoJ), also appeared cautiously hawkish and hence allowed the Gold buyers to stay hopeful.

That said, the US Dollar Index (DXY) rose for the fifth consecutive week but the benchmark 10-year Treasury bond yields snapped the four-week uptrend by posting minor weekly losses as it retreated from the highest level since 2007.

Additionally, the slight improvement in the technology shares and mildly positive outlook of the overall equities market also prod the Gold Price downside.

It’s worth noting that the market’s preparations for US Commerce Secretary Gina Raimondo’s visit to Beijing, as well as China’s readiness for more stimulus, also lures the XAU/USD buyers due to the Dragon Nation’s status as one of the world’s biggest Gold customers.

Fed’s favorite inflation gauge, United States employment clues will direct XAU/USD

While the aforementioned catalysts allowed the Gold buyers to enter the wing, their victory will depend upon the Federal Reserve’s (Fed) favorite inflation gauge, namely the Core Personal Consumption Expenditure (PCE) Price Index for July, and the monthly employment data. Additionally, the ISM PMIs for August and the second readings of the US second quarter (Q2) Gross Domestic Product (GDP) will also entertain the XAU/USD traders.

That said, outcomes suggesting firmer economic conditions in the US, a tight labor market and escalating price pressure will challenge the Gold buyers. However, the latest signals have been promising and continuations of the softer data might weigh on the US Dollar and fuel the XAU/USD towards the key technical upside hurdle, namely the $1,950 as stated below.

Also read: Gold Price Weekly Forecast: US jobs and inflation data could boost XAU/USD

Gold Price Technical Analysis

Gold Price not only managed to post the first weekly gain in five but also regained its place beyond the $1,910 support confluence comprising the 200-day Simple Moving Average (SMA) and 61.8% Fibonacci retracement of February-May upside.

Also keeping the XAU/USD buyers hopeful is the recently steady Relative Strength Index (RSI) line, placed at 14, as well as the bullish signals from the Moving Average Convergence and Divergence (MACD) indicator.

As a result, the Gold Price can extend the latest recovery towards the 50-SMA hurdle of around $1,930 and then to the 50% Fibonacci retracement level of around $1,943.

However, a falling wedge bullish chart formation comprising multiple levels marked since early May, currently between $1,948 and $1,883, appears crucial for the XAU/USD bulls to watch for taking control.

Meanwhile, the Gold Price downside past the $1,910 support confluence may stall around the $1,900 round figure ahead of challenging the stated wedge’s bottom line surrounding $1,883.

Following that, the early March swing high of around $1,858 should lure the XAU/USD bears.

To sum up, the Gold Price recovery is underway but the bulls need validation from $1,948.

Gold Price: Daily chart

Trend: Limited upside expected

“We think that underlying inflation is still a bit below our target,” said Bank of Japan (BoJ) Governor Governor Kazuo Ueda said at a Federal Reserve research symposium on Saturday per Reuters.

The policymaker added, “This is why we are sticking with our current monetary easing framework."

BoJ’s Ueda conveyed expectations of witnessing a decline in inflation from here while also stating that the underlying trend still less than the target.

BoJ’ Ueda also cited a healthy trend in the domestic demand and record high profits that bolstered the business fixed-investment to flag the inflation fears.

USD/JPY grinds higher

Even if the USD/JPY is yet to react to the news, due to the wait for Monday’s Tokyo open, the Yen pair stays on the front foot around 146.45 after refreshing the Year-To-Date (YTD) high the previous day.