Dollar boosted by risk-off sentiment

Gold trading near a multi-day low around the $2,420 mark, driven by a stronger US Dollar and profit-taking following a recent rally.

By Farah Mourad | 19 July 2024

Market open
  • Weaker Japanese Yen due to lower-than-expected June inflation data

  • Retail sales in the UK for June were weaker than expected

  • anticipation of lower borrowing costs from the Federal Reserve is influencing market sentiment

Gold Market

Gold has extended its decline during the European session on Friday, trading near a multi-day low around the $2,420 mark. This downward trend is primarily driven by a stronger US Dollar, which has rebounded from a four-month low, exerting pressure on gold for the third consecutive day. Profit-taking following the recent rally also contributes to the decline, though so far the downside appears somewhat limited.

Currencies

The USD has shown strength in early trading, appreciating between 0.1% and 0.3% against most major currencies. Expectations that Federal Reserve will begin cutting interest rates in September, with the possibility of two more cuts by the end of the year might keep US Treasury bond yields under pressure, potentially capping further gains in the USD.

Japanese Yen

The Japanese Yen is among the weakest performers. This weakness follows June's inflation data, which showed a core Consumer Price Index (CPI) increase of 2.6% year-over-year, below the expected 2.7% but up from 2.5% in May. The month-over-month core CPI remained steady at 2.8%, reducing the likelihood of a 0.10% interest rate hike at the next Bank of Japan meeting.

UK Retail Sales Data

Retail sales data from the UK for June were weaker than expected, leading to a muted reaction in the EUR/GBP pair:

Year-over-Year: Retail sales fell by 0.2%, missing the forecast of a 0.2% increase and down from the previous 1.7% growth.

Month-over-Month: Retail sales declined by 1.2%, compared to the forecasted 0.6% drop and the previous 2.9% increase.

Core Retail Sales: Also saw declines, with a year-over-year drop of 0.8% and a month-over-month decrease of 1.5%.

The decline in retail sales volumes was particularly notable in department stores, clothing retailers, and non-food stores, which saw a 2.1% decrease. Online spending also dropped by 2.7% in June 2024, though it was 2.3% higher than in June 2023.