US Dollar Forecast: GBP/USD Weakens as Gold Prices Dip on Dovish BoE Outlook

U.S. Dollar, Treasury Yields, and Gold Prices React to Economic Data and Geopolitical Risks

The U.S. dollar traded at its highest level since August 20, but faced resistance on Thursday as it approached key technical levels. With a 50% retracement at 101.852 and the 50-day moving average at 101.857, the dollar may either surge to the next pivot at 102.478 or retreat to the minor pivot at 101.049. Market participants are closely watching how these technical levels will influence short-term price movements.

At 13:53 GMT, the U.S. Dollar Index (DXY) is trading 101.889, up 0.288 or +0.28%.

Gold Under Pressure as Rate Cut Bets Fall

Gold prices dropped as stronger U.S. economic data tempered expectations of a significant interest rate cut by the Federal Reserve in November. The market is now pricing in a 34% chance of a 50-basis-point cut, down from 49% last week, according to CME’s FedWatch tool. Richmond Federal Reserve President Thomas Barkin noted that inflation might remain above the 2% target for longer, limiting aggressive rate cuts.

Despite the decline, gold remains near its record high of $2,685.64, supported by geopolitical tension in the Middle East. U.S.-Israel tensions intensified after Iran’s missile attack on Israel, adding safe-haven demand for gold. However, the possibility of a less aggressive rate cut continues to limit upside momentum.

Investors are awaiting the U.S. non-farm payrolls report, scheduled for Friday. A weaker-than-expected jobs print could drive gold prices higher, with potential to test the $2,700 mark.

Treasury Yields Rise as Focus Shifts to Labor Market Data

U.S. Treasury yields rose on Thursday as investors shifted focus to labor market data, with the yield on the 10-year Treasury increasing by more than 2 basis points to 3.813%. The 2-year Treasury yield also rose to 3.674%. Private payrolls data from ADP revealed stronger-than-expected growth, with private employers adding 143,000 jobs in September, surpassing expectations of 128,000.

The labor market strength puts more pressure on the Federal Reserve’s interest rate decisions. Friday’s non-farm payrolls report will play a key role in shaping expectations for further monetary policy moves, particularly the potential for rate cuts.

Currencies: Safe-Haven Dollar Gains as Sterling and Yen Weaken

The U.S. dollar strengthened across the board as geopolitical tensions and stronger economic data supported demand. Safe-haven buying increased following Iran’s missile attack on Israel, while better-than-expected U.S. private payrolls data pushed expectations for a robust non-farm payrolls report on Friday.

Sterling fell 1.2% to $1.31040 after dovish comments from Bank of England Governor Andrew Bailey, who suggested the central bank may ease rates faster than anticipated. The yen also weakened, hitting a six-week low after Japan’s Prime Minister signaled that further rate hikes were unlikely in the near term.

Market Forecast: Mixed Outlook

The outlook for the dollar remains cautiously bullish, supported by geopolitical risks and stronger-than-expected labor data. Gold faces a mixed outlook, with near-term gains likely dependent on weaker-than-expected U.S. jobs data, while bond yields may continue rising as investors adjust their expectations for future rate cuts.