Gold prices slip ahead of US CPI

Currencies

The UK CPI inflation report for July, delivered an unexpected dovish tone. While markets had anticipated a rise in headline inflation alongside a slight easing in core inflation, the actual data showed a milder increase in headline inflation and a sharper-than-expected deceleration in core inflation. Both monthly figures also came in lower than forecasts, prompting a swift negative reaction in the British Pound (GBP).

The New Zealand Dollar (NZD) is the weakest performer among major currencies this morning after the Reserve Bank of New Zealand (RBNZ) unexpectedly reduced its cash rate by 25 basis points to 5.25%. This move surprised the market, which had largely expected the RBNZ to hold steady at 5.50%. RBNZ Governor Adrian Orr expressed confidence that inflation is now within the target range, paving the way for potential rate normalization. Money markets are now pricing in another rate cut at the RBNZ’s next meeting in October.

Commodities

Gold has come under renewed selling pressure, declining for the second straight day after an early session uptick in Asia. The slide is mainly due to market repositioning ahead of today’s crucial US consumer inflation data. Additionally, a positive tone in equity markets has reduced demand for safe-haven assets like gold. Despite this, concerns over escalating geopolitical tensions in the Middle East and expectations of further Federal Reserve rate cuts may limit gold’s downside.

West Texas Intermediate crude oil is trading around $77.20 per barrel this morning, edging lower as fears of a broader Middle East conflict ease and concerns about global oil demand persist. Despite ongoing geopolitical tensions, the risk of a wider war appears to have diminished after Iran indicated that renewed ceasefire talks with Hamas could avert further retaliation.

The International Energy Agency (IEA) forecasts a slowdown in oil demand growth. Additionally, OPEC has downgraded its global oil demand growth forecast for 2024, citing weaker-than-expected data from the first half of the year and reduced optimism about the Chinese economy.

Today's Data

Today’s market movements will likely be influenced by inflation data from the USA. The markets expect CPI Headline YoY to come between 2.9% and 3.1%, while Core CPI excluding food and energy YoY is expected to be between 3.1% and 3.3%.

Unexpected data can lead to rapid asset revaluation, trigger automated trading systems, and influence monetary policy decisions, all of which contribute to increased market volatility.

Keep an eye on today’s developments, as any surprises in the data could set the tone for market movements in the coming days.