US Dollar Weakens as Gold Gains Traction on Revised GDP Figures

The US dollar stumbled as gold gained ground in response to revised GDP data, while Europe experienced surging inflation, pushing yields higher and boosting the euro's prospects.

Key Factors for Today

• Gold and Euro Gain Momentum Following US GDP Revision
• ADP Employment Data Adds to Concerns of Slowing Job Growth
• EIA Confirms Crude Drawdown, WTI Prices Hold Steady
• Euro Strengthens on Elevated Consumer Price Index (CPI) Figures
• UK Businesses Propel Cable to 3-Day Winning Streak
• Japan's Industrial Production Slump Drives USD/JPY Higher

Market Movers

• Gold Sees 3rd Consecutive Day of Gains as Supportive Data Emerges
• August ADP Employment Change Falls Short of Expectations at 177K
• Preliminary Q2 GDP Revised Lower to 2.1%, Raising Doubts on Fed Rate Hike
• Crude Inventories Experience Massive -10.6M Bbl Drawdown, WTI Stable
• European CPI Data Surpasses Forecasts, Enhancing Euro's Appeal
• Lloyds Business Barometer Rises, Boosting UK Retail Sales Optimism
• Japan's Industrial Production Contracts, Impacting USD/JPY Exchange Rate

Economic Calendar

• FR Inflation and GDP
• ECB Schnabel Speech
• BOE Pill Speech
• DE Unemployment
• EA Inflation and Unemployment
• IT Inflation

The Big News

Gold's Streak Continues Amid Economic Uncertainties

Gold continued its triumphant streak, marking its third consecutive day of gains. August's ADP employment change, however, underwhelmed, reporting only 177K jobs added compared to the projected 195K. This figure compounded concerns over the current deceleration in job growth. Moreover, a downward revision of the preliminary Q2 GDP from 2.4% to 2.1% further fuelled speculation regarding the Federal Reserve's next move on interest rates.

Crude Inventory Drawdown: Energy Demand Surprises Markets

The Department of Energy (DOE) reported an impressive -10.6 million barrel drawdown in crude inventories, outpacing the expected -2 million barrels. This substantial decrease was attributed to higher-than-expected consumer demand for energy. Despite Gulf-related production disruptions and a growth of 0.6 million barrels in the Strategic Petroleum Reserve (SPR), the WTI market remained resilient, maintaining its position above $80 per barrel.

Gold's Streak Continues Amid Economic Uncertainties

Gold maintained its impressive winning streak, celebrating a third consecutive day of gains. However, this bullish momentum was juxtaposed against lacklustre employment data from August's ADP report. A mere 177K jobs were added, significantly below the expected 195K, deepening concerns over the ongoing deceleration in job growth. This unsettling news was further compounded by a downward revision of the preliminary Q2 GDP figure, which slipped from 2.4% to 2.1%. This revision is casting shadows of doubt on the Federal Reserve's imminent decisions regarding interest rates.

Crude Inventory Drawdown: Energy Demand Surprises Markets

The Department of Energy (DOE) shook the energy market by announcing a remarkable drawdown of -10.6 million barrels in crude inventories, exceeding forecasts that had anticipated a much more modest -2 million barrels decrease. This sizable drop was driven by unexpected consumer energy demand that outpaced even the boldest projections. Despite disruptions caused by Gulf-related production halts and a growth of 0.6 million barrels in the Strategic Petroleum Reserve (SPR), the West Texas Intermediate (WTI) market showcased its resilience by holding above the $80 per barrel mark.

Euro Rises on Inflation Surge, Fuelling Rate Hike Speculation

The Euro's ascent was catalysed by impressive Consumer Price Index (CPI) figures from various European nations. Germany's preliminary CPI for August soared to 6.1%, exceeding the anticipated 6.0%. Spain's CPI also demonstrated strength, rising to 2.6%, the highest level seen since May. The surge in CPI figures was mirrored by rising yields across Europe, bolstering confidence in the Eurozone economy. This rise in inflation further heightened expectations that the European Central Bank (ECB) might proceed with additional interest rate hikes.

UK Businesses Fuel Cable's 3-Day Winning Streak Amid Mixed Signals

UK businesses played a pivotal role in Cable's three-day winning streak. The Lloyds business barometer leapt to 41 from the previous 31, hitting its highest level since February 2022. This was propelled by robust retail sales and growing optimism about the trajectory of interest rates. However, UK mortgage approvals dipped to 49.4, falling short of the anticipated 51.0K. Cable's performance was further supported by a softer dollar, with $1.27 serving as a significant short-term support level.

Japan's Industrial Production Woes Send Ripples Through Exchange Rates

Japan's industrial production took a hit, with preliminary July data indicating a contraction of -2.0%, worse than the expected -1.4%. The Japanese government lowered its assessment of industrial output, attributing the decline to weakening domestic and international demand. Despite a weaker dollar, USD/JPY recorded marginal gains above 146, with round support at 145 and resistance at 147.