Dollar Falls and Gold Surges as U.S. Inflation Cools

The dollar falls, and gold surges as U.S. inflation eases, shaping market dynamics and influencing the Asia session outlook.

Recap of U.S. Session

The U.S. session saw significant market movements driven by inflation data and Federal Reserve decisions. U.S. inflation for May came in softer than expected, with both headline and core Consumer Price Index (CPI) readings easing monthly and annual, below forecasts. This prompted a substantial sell-off of the U.S. dollar, with the dollar index (DXY) falling from above 105.10 to as low as 104.25. Concurrently, gold prices surged from $2,315/oz to $2,341/oz.

Additionally, the Federal Reserve maintained its Fed Funds rate at 5.25-5.5%, as anticipated, but the Summary of Economic Projections (SEP) indicated only one rate cut in 2024 and two in 2025. Fed Chair Jerome Powell’s hawkish commentary suggested that some FOMC members opposed any cuts this year. This tempered some initial market reactions, stabilizing the DXY around 104.30 and leading to a partial recovery, while gold prices retreated towards $2,310/oz.

Implications for the Asia Session

Australia: Labor Force Report

Australia’s Labor Force report for May is due. Expectations are that the unemployment rate will decline from 4.1% to 4.0% and that 30.5K jobs will be added. Strong figures could boost the Australian dollar (AUD).

Key Events Today:

• Labor Force Report (1:30 am GMT)

Market Outlook

The Dollar Index (DXY)

The DXY could face further pressure today if the Producer Price Index (PPI) readings align with the softer inflation trend in the CPI data. Rising unemployment claims, trending higher in recent weeks, could also weigh on the dollar.

Key Events Today:

• PPI (12:30 pm GMT)
• Unemployment Claims (12:30 pm GMT)

Next 24 Hours Bias: Medium Bearish

Gold (XAU)

Gold prices could benefit from continued dollar weakness if PPI readings remain subdued and unemployment claims rise.

Next 24 Hours Bias: Weak, Bullish

The Australian Dollar (AUD)

A robust Labor Force report could strengthen the AUD, adding to its gains.

Next 24 Hours Bias: Weak, Bullish

Dollar Falls and Gold Surges as U.S. Inflation Cools

The Kiwi Dollar (NZD)

The NZD saw volatility due to U.S. inflation data and Fed decisions, trading around 0.6170 at the start of the Asia session. Key support and resistance levels are at 0.6100 and 0.6220, respectively.

Next 24 Hours Bias: Medium Bullish

The Japanese Yen (JPY)

The USD/JPY pair experienced significant movements, diving, and recovery. It is now trading at around 156.90. Key support and resistance levels are at 155.70 and 157.50.

Next 24 Hours Bias: Weak, Bullish

The Euro (EUR)

The EUR/USD saw similar volatility, trading around 1.0805 with support at 1.0790 and resistance at 1.0860.

Next 24 Hours Bias: Medium Bullish

The Swiss Franc (CHF)

USD/CHF was around 0.8950, with support at 0.8880 and resistance at 0.8990.

Next 24 Hours Bias: Weak, Bullish

The Pound (GBP)

GBP/USD, trading around 1.2785, saw support at 1.2755 and resistance at 1.2855.

Next 24 Hours Bias: Weak, Bullish

The Canadian Dollar (CAD)

USD/CAD returned to around 1.3740, with support at 1.3680 and resistance at 1.3780.

Next 24 Hours Bias: Weak, Bullish

Commodity Outlook

Oil

Oil prices, pressured by a surprise build in EIA inventories and higher U.S. borrowing costs, may remain under pressure. However, the uptrend appears intact.

Next 24 Hours Bias: Weak Bearish

Conclusion

Asian markets will react to overnight developments in the U.S., with key data releases driving currency movements. Look for Australia’s Labour Force report to impact AUD volatility and monitor PPI and unemployment claims data for further direction on the dollar.

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