XAUUSD is moving in the Box pattern and the market has reached the resistance area of the pattern
The US CPI is the primary indicator for rate hike or pause to control consumer spending, with the majority of chances FED likely to delay rate raise in June month, but data might come in higher than experts had anticipated as a result of strong NFP data that demonstrates pay increase.
US CPI and inflation come in at tick positive figures, the FED is projected to raise interest rates.
US Dollar’s Inflation Expectations
The recent preference of the market for the US dollar is due to US inflation expectations, which are based on the 10-year and 5-year breakeven inflation rates from the St. Louis Federal Reserve data. Recent signals for US price pressures have become more consistent.
Despite this, the 10-year FRED index continues its upward trend from Friday, increasing to 2.23%, its highest level since May, while the 5-year index follows suit, rising to 2.22% by the close of Monday’s North American trading session. The US Dollar Index maintains ground above 101.00 due to the positive US Treasury bond yields and recently stronger inflation signs, despite being close to the Year-To-Date lows.
Cautious Atmosphere Ahead of US Consumer Price Index
The cautious atmosphere ahead of this week’s US Consumer Price Index drives the buyers of the dollar. Fears of a US default, a dovish Fed raise, and confusing signals from the Nonfarm Payrolls may all be on the same page.
USDJPY is moving in the Box pattern and the market has reached the resistance area of the pattern.
The US Dollar’s recent swings have been hampered by a light calendar, a cautious attitude ahead of important US data, the market’s consolidation following a turbulent week, and other factors, even though inflation signs are price-positive.
U.S. Treasury Rates Increased
Although U.S. Treasury rates increased throughout the curve on Monday as a result of better-than-expected nonfarm payrolls data last Friday and higher oil prices over the previous two trading sessions, the U.S. dollar, as measured by the DXY index, was somewhat weaker.
EURUSD is moving in the Descending channel and the market has rebounded from the lower low area of the channel
The bond rate rally affected the Nasdaq 100, which declined by approximately 0.3% to 13,280.
Bulls failed to take the tech index over technical resistance at 13,370 in front of a busy economic calendar as bullish momentum waned.
This Week’s Major Events: US Borrowing Cap and US Inflation Data
This week’s major events are a meeting at the White House between the President and a number of congressmen to talk about the U.S. borrowing cap and the U.S. inflation data for April. To overcome the impasse over extending the debt ceiling, President Biden will welcome key Senate officials from both ends of the political spectrum on Tuesday.
GBPUSD is moving in an Ascending channel and the market has broken the higher low area of the channel.
President Biden must strike an agreement quickly to save the United States from defaulting, which would be disastrous for the world economy and financial system.
The Treasury Department is predicted to run out of money to pay its payments as early as June 1. On Wednesday morning, the U.S. Bureau of Labour Statistics is scheduled to issue statistics on the previous month’s consumer price index. Expectations indicate that the headline CPI will increase by 0.4% month over month, maintaining the annual rate at 5.0%.
Impact of US Inflation Data on Gold Prices
Tuesday’s U.S. inflation data, which investors will be watching for hints on the Federal Reserve’s policy course, caused gold prices to flicker in a constrained range. As of 0639 GMT, spot gold was up 0.2% at $2,026.09 per ounce. Prices fluctuated within a narrow $9 range. According to Ajay Kedia, director at Mumbai-based Kedia Commodities, gold prices might finally fall to the $1,950-$1,920 area if the inflation report comes in quickly and fuels concerns about another Fed rate hike in June.
US Stocks Take a Break
As investors turn their attention to a crucial inflation data later this week, U.S. stocks took a break on Monday following a robust gain in the previous session. While Tyson Foods and Catalent reported poor profits and regional banks experienced a brief uptick, equities struggled to find direction for the day.
AUDUSD is moving in the Descending channel and the market has rebounded from the lower low area of the channel
Tyson Foods suffered due to a surprising loss in the second quarter and a reduction in its year revenue projection, while shares of Catalent Inc (CTLT.N) fell as the contract medicine manufacturer experienced reduced revenue and core profit in 2023.
Impact on Fed’s Monetary Policy Outlook
Inflation must continue to decline for the Fed’s monetary policy outlook to remain dovish, as implied by Fed futures.
If CPI figures come in higher than expected, expectations for rate cuts in the second half of 2023 may wane, which would strengthen rates and the dollar. The Nasdaq 100 would suffer as a result of this.
Conclusion
In conclusion, the recent preference for the US dollar is driven by US inflation expectations, which are based on the 10-year and 5-year breakeven inflation rates. The cautious atmosphere ahead of this week’s US Consumer Price Index drives the buyers of the dollar, while fears of a US default, a dovish Fed raise, and confusing signals from the Nonfarm Payrolls add to the uncertainty. This week’s major events are a meeting at the White House to talk about the U.S. borrowing cap and the U.S. inflation data for April. The impact of US inflation data on gold prices is also a significant consideration for investors, with gold prices fluctuating in a constrained range ahead of the release of the CPI figures. Finally, the Fed’s monetary policy outlook is closely tied to the CPI figures, and if they come in higher than expected, expectations for rate cuts in the second half of 2023 may wane, which would strengthen rates and the dollar, while negatively impacting the Nasdaq 100.
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