The price of gold increased by about 0.3%, helped by the negative dynamics of the US currency. Market participants are also preparing for the publication of important US data that may affect the Fed's interest rate decisions. In addition, investors are focusing on the risk of the U.S. government agency shutdowns if Congress fails to reach an agreement on a borrowing extension by Friday.
The US Dollar Currency Index (DXY), which tracks the dynamics of the dollar against six currencies (euro, swiss franc, yen, canadian dollar, pound sterling and swedish krona) fell by 0.08% to 103.72.
One of the key events of this week will be the publication of the core personal consumption expenditures (PCE) price index - the Fed's preferred measure of inflation. The overall PCE is expected to have decreased to the level of a year ago (2.4%), while the core PCE fell to 2.8%. However, the January data on the consumer price index and the producer price index suggest higher monthly figures for both the overall and core PCE, driven by growth in the services sector. Given that services remain a key factor in the steady decline in inflation, this is likely to prevent an inevitable rate cut from the Fed. Recent statements by Fed policymakers have also indicated that the Central Bank is in no hurry to cut interest rates. Against this background, investors have revised their expectations regarding the timing of rate cuts. According to the CME FedWatch Tool, markets see a 17.2% probability of a 25 basis point rate cut at the Fed meeting in May, and a 62.8% probability of a rate cut in June, with 81 basis points of cuts priced in for this year.