Gold Awaits US Inflation Data
Gold () prices fell by 0.36% on Monday, as the (USD) rose for a sixth consecutive trading session.
US President Donald Trump formally notified leaders of 25 countries about new tariff rates set to take effect on 1 August, reigniting concerns over escalating trade conflicts. The latest measures include 30% tariffs on imports from major partners such as the EU and Mexico, potentially affecting global trade flows and inflation expectations across key sectors.
In addition, Trump cautioned that countries retaliating with counter-tariffs may face even steeper duties, amplifying the risk of a broader trade stand-off. However, the administration signalled a willingness to negotiate further with trading partners before the tariffs are officially implemented, leaving the door open for a potential de-escalation.
XAU/USD rose during the Asian and early European trading sessions. Trade tensions continue to influence the market, so traders should monitor upcoming news about US tariffs. Also, today’s US (CPI) report at 12:30 p.m. UTC may add extra volatility to all USD pairs, including XAU/USD. If the report reveals higher-than-expected inflation, XAU/USD may decline slightly. Conversely, slowing inflation will likely give XAU/USD a significant boost.
Euro Remains in a Downtrend
The euro () remained below 1.16800 on Tuesday, hovering near a three-week low as markets positioned cautiously ahead of the US (CPI) report. Investors will closely monitor the data for signs of how US President Donald Trump’s tariffs may have affected consumer prices, potentially reshaping the inflation outlook and monetary policy expectations in the near term.
Federal Reserve (Fed) Chair Jerome Powell has recently noted that inflation could rise over the summer as tariff pressures build, reinforcing the view that the Fed may delay any until later this year. As investors adjust their rate expectations and hedge against the risk of prolonged higher rates, this has helped maintain demand for the US dollar (USD) amid global uncertainty.
At the same time, concerns about the Fed’s independence have resurfaced, with Trump renewing his criticism of Powell’s policies. Trump argued that interest rates should be at 1% or lower, creating further uncertainty about the central bank’s policy direction. Still, markets currently expect the Fed to maintain its cautious approach unless inflation or growth data deteriorate sharply.
On the trade front, Trump signalled a readiness for further negotiations with the EU and other key partners, leaving room for potential de-escalation of tariff tensions. However, the persistent uncertainty around trade policy continues to support the US dollar’s safe-haven appeal, as investors seek clarity on how tariffs may affect domestic inflation and the Fed’s future rate path.
Dovish BoE Signals Pressure British Pound
The British pound () traded at 1.34900 on Tuesday, near a three-week low, as markets digested signals from Bank of England (BoE) Governor Andrew Bailey. Bailey indicated that the BoE is ready to implement deeper rate cuts if the U.K. labour market shows further signs of weakness. This cautious tone reflects the BoE’s increasing focus on economic slack as it navigates a period of below-potential growth while aiming to ensure that inflation continues to ease sustainably.
Bailey noted that the U.K. economy is underperforming relative to its potential, creating excess capacity that could naturally help reduce inflation over time. He added that the monetary policy path remains ’downward’, signalling the likelihood of further rate cuts in the coming months. However, he also left the door open for a faster pace of easing if economic conditions deteriorate sharply, adding a dovish undertone to the GBP outlook.
Markets are now turning their attention to the upcoming U.K. labour market report later this week, which will provide crucial insight into employment trends and wage pressures. Also, the key inflation report is due on Wednesday, offering further clarity on the BoE’s scope to lower rates while maintaining price stability. These reports are expected to drive near-term volatility in GBP and shape expectations for the timing and scale of the BoE’s next .
Meanwhile, the U.K.’s economy may find some near-term support as to a result of a trade agreement with the US as EU exports face headwinds from US tariffs, the U.K. could benefit from diverted trade flows and increased foreign investment, with firms seeking tariff-free access via U.K. channels. This dynamic may offset domestic economic challenges, although its impact on the broader growth outlook remains to be seen.
