Gold prices held steady around the key $2,000 an ounce level on Friday, as a disappointing US jobs report boosted speculation that the Federal Reserve may pause its interest rate hikes, leading to a weaker dollar and lower bond yields.
The US Labor Department report showed that nonfarm payroll employment rose by just 150,000 jobs in October, falling short of the expected 180,000 gain, with strikes at Detroit’s three major automakers partly contributing to the soft figures. Market participants are now pricing in a 95% chance of the Fed keeping rates on hold in December, according to the CME FedWatch tool.
Euro climbs 1% against weaker dollar on rate cut bets
The euro gained as much as 1% on Friday as the US dollar index fell on a weaker-than-expected nonfarm payrolls report.
Investors are increasingly convinced that inflation is peaking, suggesting that central banks may need to ease policy to prevent monetary policy from becoming too tight in practice. Fed funds futures are now pricing in an 85% chance that the Fed has finished tightening and an 80% probability of rate cuts starting in June. Market futures indicate an 80% chance that the European Central Bank (ECB) will start cutting rates by April.
Gold and the euro are likely to remain supported in the near term as the dollar continues to weaken on expectations of slower Fed rate hikes and potential ECB rate cuts. However, investors will need to keep an eye on key data releases such as the German industrial orders and Hamburg Commercial Bank (HCOB) Purchasing Managers’ Indices (PMIs) from across Europe this week. Lower-than-expected figures could weigh on the euro.