Gold retreats from 1-month peak

Market expectations now point to a Federal Reserve rate cut in the first half of the year

By Farah Mourad | 16 January 2025

Copied
Market open
  • The EUR/USD climbed to 1.0350

  • GBP/USD pair dipped to 1.2220

  • WTI trading around $78.85

U.S. Inflation and Interest Rate Expectations

Recent declines in U.S. core inflation have adjusted market expectations for Federal Reserve policy. The first rate cut of the year, once projected for September, is now anticipated in the first half of the year. Cooler inflation data has intensified speculation that the Fed may implement two rate cuts during 2025.

EUR/USD

The EUR/USD pair initially climbed to 1.0350 but later lost ground as the dollar regained strength, pushing the pair below 1.0300. Early Thursday trading saw the pair continue its downtrend, trading near 1.0280, as European Central Bank (ECB) officials signaled further monetary easing in response to the Eurozone’s weak economic outlook. At a recent conference, ECB policymaker Olli Rehn suggested that monetary policy could move out of restrictive territory by midsummer.

GBP/USD and UK Inflation

The GBP/USD pair dipped to 1.2220 on Thursday after two days of gains. This downward move followed weaker-than-expected UK inflation data, which has fueled expectations of rate cuts by the Bank of England. Additionally, the yield on the UK 10-year Gilt fell to 4.73%, retreating from its recent multi-decade highs.

Commodities

Gold

The price of Gold dropped from its one-month peak earlier today, as investors moved towards riskier assets and as the dollar attracted some dip-buying. Remaining worries from Trump's trade tariff plans might continue to support the safe heaven until clearer plans come to light.

Silver

Silver prices gained support from a weaker U.S. dollar, as a softer dollar makes dollar-denominated assets more affordable for international buyers. However, silver demand faces potential challenges due to overcapacity in China’s solar panel industry. Several photovoltaic companies have entered a government-mandated self-discipline program to address the issue.

WTI Crude Oil

West Texas Intermediate (WTI) crude oil is trading around $78.85. Prices have edged lower due to improved prospects for a ceasefire in the Middle East. The easing of geopolitical tensions has tempered concerns over potential supply disruptions in the region.

Copied