Following the release of robust non-farm payroll (NFP) data in the United States, gold prices are experiencing downward pressure. The robust labor demand is anticipated to impede the decline of inflation towards the Federal Reserve’s target of 2%, which may dampen market expectations for interest rate cuts in June. As a result, the opportunity cost of holding non-yielding assets like gold increases, leading to a decline in its price. Additionally, the 10-year US Treasury yield has surged to 4.39%, indicating that strong labor market conditions could prompt the Fed to maintain higher interest rates for an extended period.
Traders are currently pricing in a 58% probability of the Fed trimming interest rates in June, according to the CME FedWatch Tool. However, following the release of the upbeat US NFP data, traders’ expectations for Fed rate cuts have diminished.
The US Dollar Index (DXY), which measures the dollar’s strength against six major currencies, has continued its recovery and reached 104.50. This uptrend in the US Dollar is fueled by positive employment conditions, suggesting an optimistic economic outlook.
Earlier this week, the US Dollar experienced a sharp decline after the release of disappointing US Services PMI data for March. The Services PMI dropped to 51.4, falling short of expectations of 52.7, with the previous reading standing at 52.6.
