Weak US Economic Statistics Support Gold
Gold ( XAU/USD ) gained 1.97% on Thursday as the US dollar (USD) weakened after the release of April inflation data, which signalled a potential shift in monetary expectations.
According to the US Bureau of Labor Statistics, the Producer Price Index (PPI) rose 2.4% year-on-year, down from 3.4% in March, aligning with analyst expectations. Core PPI , which excludes food and energy, increased by 3.1%, easing from 4% but slightly exceeding the forecast of 3%. This slowdown in wholesale prices suggests easing inflationary pressures at the production level, which could influence the Federal Reserve’s (Fed) policy stance.
Adding to the softening economic signals, US retail sales for April grew by just 0.1% month-on-month—a sharp slowdown from the robust 1.7% increase in March—below the expected 0.15%. This decline in consumer spending, alongside cooling producer prices, reinforces speculation that the Fed may adopt a more cautious approach to future rate hikes or consider easing policy if the trend persists. These developments contributed to the downward pressure on the US dollar.
XAU/USD fell during the Asian and early European trading sessions. Today, the University of Michigan (UoM) will release a preliminary report on US Consumer Sentiment at 2:00 p.m. UTC. Lower-than-expected figures might increase the likelihood of more rate cuts by the Fed later this year, pushing XAU/USD higher. Conversely, higher-than-expected results may temporarily pause the rally in gold.
Euro Benefits From Weaker-than-Expected US Economic Data
On Thursday, the euro ( EUR/USD ) gained 0.10% against the US dollar (USD), after downside surprises in US economic data have reinforced market expectations for additional Federal Reserve rate cuts later this year.
In a speech on Thursday, Fed Chairman Jerome Powell stated that policymakers are re-evaluating their approach to balancing the dual mandate of price stability and maximum employment. Powell emphasised the need to reconsider the underlying assumptions guiding monetary policy, particularly in light of recent inflation dynamics and labour market trends. His remarks suggest a potential pivot in strategy, aligning with expectations that further easing may be necessary to support the economy.
"Chair Powell said that the FOMC will be placing more weight on the inflation outlook than on employment when setting monetary policy following a monetary policy framework review. This suggests a potentially higher hurdle to Fed cuts if inflation risks remain to the upside", said Kristina Clifton, Senior Currency Strategist at Commonwealth Bank of Australia. "We forecast three FOMC interest rate cuts this year. But the risks lie towards fewer cuts if inflation picks up".
EUR/USD rose slightly during the Asian and early European trading sessions. Today, euro traders should focus on developments in global trade tariffs and the peace talks between Russia and Ukraine. Additionally, the US Retail Sales report, due at 12:30 p.m. UTC, may add volatility to all USD pairs. Higher-than-expected figures may push EUR/USD down towards 1.11660. Conversely, lower-than-expected results may lift the pair back towards 1.12680.
BTC Consolidates Ahead of the Next Big Move
Bitcoin (BTC/USD) rose by 0.23% against the US dollar (USD) on Thursday and moved near $104,000 on the expectation of decisions regarding the US interest rate and tariffs policy.
Softer readings across key US economic indicators—including inflation and consumer spending—have led investors to price in a more dovish policy trajectory. This shift reflects growing concerns that economic momentum is losing steam, prompting a reassessment of the Federal Reserve’s (Fed) ability to maintain higher rates without risking a deeper slowdown.
"I have a suspicion that this is not just about tariffs, I have a suspicion that there’s an underlying tone of weakness in the US consumer", said Thierry Wizman, Global FX and Rates Strategist at Macquarie. "It is the tariffs, but it’s also the underlying weakness among US consumers at this point, and Q2 will be a weak quarter for growth, given that we came into it with poor sentiment and a lot of uncertainty around policy. And it has not been completely resolved yet, despite what we did with China last weekend".
BTC/USD rose slightly during Asian and early European trading sessions. Today, traders should focus on the University of Michigan (UoM) Consumer Sentiment data at 2:00 p.m. UTC. The report may spur volatility, as it could shed light on potential shifts in US monetary policy. Key levels to watch are support at $101,400 and resistance at $105,000.