The EUR/USD pair attempted a comeback on Friday, recovering from a recent slump caused by weaker Eurozone inflation data.

The Eurozone Harmonised Index of Consumer Prices (HICP) decelerated more than expected in November, causing traders to speculate about the possibility of a rate cut by the European Central Bank (ECB). However, ECB officials have indicated that it may be too early to reduce interest rates.

Meanwhile, the US Dollar (USD) is experiencing subdued price action, which is acting as a tailwind for the EUR/USD pair. The release of US macro data on Thursday revealed that inflation continues to moderate, and there is a slowdown in the labor market. This gives the Federal Reserve (Fed) more reason to hold rates steady and potentially start cutting in 2024.

However, some Fed officials have pushed back against expectations for quick rate cuts, leaving room for further tightening if inflation progress stalls. This cautious sentiment, along with mixed economic signals from China’s manufacturing sector, is weighing on investors’ sentiment. All eyes are now on Fed Chair Jerome Powell’s speech for more cues on interest rates, which will influence the dynamics of the USD and provide impetus to the major currencies.

The release of the US ISM Manufacturing PMI is also expected to create short-term trading opportunities for the EUR/USD pair. Despite this, spot prices have halted their retracement slide and snapped a two-day losing streak, indicating potential resilience in the market.

GBP/USD Trades Higher on Hawkish BoE and Weaker US Dollar

In the European session on Friday, the GBP/USD pair is recovering from previous losses and trading higher around 1.2650. The sentiment around the pair is being supported by a weaker US Dollar and hawkish comments from the Bank of England (BoE).

Following a sharp decline in the US Dollar on Tuesday, the GBP/USD pair reached its highest level since late August. The dovish comments from Federal Reserve (Fed) officials have reinforced the market’s belief that the central bank is done with rate hikes.

While minor figures from the UK posted earlier in the day were somewhat mixed, they did not significantly impact the sentiment. On one hand, October Consumer Credit unexpectedly rose, but less than in September. On the other hand, M4 Money Supply and Mortgage Approvals both showed positive growth.

The decline in US government bond yields is also limiting USD gains. With the 10-year Treasury note offering its lowest yield in two months and the 2-year note at its lowest since mid-July, investors are turning away from the US Dollar.

Key events to watch out for include the release of the second estimate of Q3 Gross Domestic Product (GDP) from the US, which is expected to confirm growth at a slightly better pace than before. Additionally, multiple Federal Reserve speakers will be providing insights, while the BoE Governor, Andrew Bailey, will deliver remarks at an event celebrating the 50th anniversary of the London Foreign Exchange Joint Standing Committee.

Gold Price Struggles to Build on Modest Intraday Gains as it Awaits US Data and Powell’s Speech

Gold price struggles to build on modest intraday gains as it awaits the release of the US ISM PMI data and Fed Chair Jerome Powell’s speech. The precious metal has maintained its upward momentum but lacks follow-through, trading around the $2,041-$2042 level, up 0.25% for the day. The recent US macro data indicating easing inflationary pressure and a slowing labor market has reinforced expectations that the Fed will maintain steady rates and potentially consider rate cuts in 2024.

Mixed economic signals from China have also contributed to investor sentiment, supporting the safe-haven appeal of gold. However, remarks from New York Fed Bank President John Williams and San Francisco Fed President Mary Daly caution against immediate rate cuts, providing support to the US Dollar and capping gold’s gains. Traders are now eagerly awaiting the US ISM PMI data and Powell’s speech for further direction.

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