On Friday morning, several European markets are cautiously higher as investors await the release of key inflation data for the eurozone. This data is expected to show a further slowdown in consumer price increases. This puts the release of Eurozone inflation data later in the session in the spotlight.
The consumer price index for the eurozone is scheduled for release late this morning. After France, Germany, and Italy all reported slower growth over the past week than originally expected, investors are hopeful that inflation has now reached a peak across the 20-member currency bloc.
This could be a sign that the European Central Bank is preparing to temper its aggressive tightening cycle of monetary policy. This could limit the economic pain that the continent is facing.
CPI figures are expected to be 9.7% annually in December. Although this is just a slight decline from a 10.1% growth rate in the previous month, there is a feeling of positive anticipation within the markets that there may be a positive surprise with a significant drop in December. It was reported on Friday that German retail sales rose 1.1% during November. However, this represented an annual decline of 5.9%, while factory orders in the country fell 5.3% in November.
This week's better-than-expected US macro data, which pointed to a resilient labour market in the US, continues to support the USD. This could allow the Federal Reserve to maintain its aggressive hikes in interest rates.
In the wake of the closely watched US monthly jobs data scheduled to be released on Friday, the intraday uptick in gold prices is believed to be the result of repositioning trades. It is anticipated that the popular NFP report will play a crucial role in influencing the Fed's rate hike path as well as determining the direction the yellow metal is headed. While the dollar-denominated commodity may be able to rise, strong follow-up buying around the US Dollar could limit its upside potential in the short term.
During the last trading day of the week, gold received some dip buying, which stopped its retracement slide from its highest level since June 2022, around the $1,865 area it reached on Wednesday. XAU/USD remained in a bid tone throughout the early European session, with the price hovering just below $1,840 near the top of the daily range.
Non-farm payrolls and ADP
Data from Europe may set the stage for the US jobs report later in the session.
Despite the Fed's efforts to control inflation, Thursday's ADP private payrolls report in the US continued to show a strong labour market. ADP's private payroll report published on Thursday indicates that employers added 235,000 jobs in December, highlighting the strength of the labour market, despite the Fed's attempt to tame inflation. There is still room for increasing interest rates in the future, according to the report. However, the minutes of the last meeting of the US Federal Reserve, which were published earlier this week, showed that policymakers stateside were seemingly unmoved by the Fed's hawkish stance at the same time that they sought to bring inflation back down to the target level.
Investors will be closely watching Friday’s December nonfarm payrolls report for further indications as to the path of monetary policy. The number of nonfarm payrolls is expected to rise by 200,000 in December, while the unemployment rate is likely to remain at a healthy 3.7%. Rate-rise bets may once again be stymied by such healthy figures.
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