• Gold price bounces from $2,040 as investors see the Fed reducing interest rates in June.
• Fed policymakers are reluctant to offer concrete timing for rate cuts.
• The US Dollar will be guided by the ISM manufacturing PMI.

Gold price (XAU/USD) rebounds from $2,040 in Friday’s European session as market expectations for rate cuts in the June policy meeting remain alive. The United States core Personal Consumption Expenditure Price Index (PCE) data for January, released on Thursday, was in line with expectations. 

The annual US core inflation data decelerated to 2.8%. This was the lowest increase in three years. However, bets supporting rate cuts have not intensified as the impact of soft annual core inflation figure was offset by a 0.4% month-on-month increase in the same.

Although the pace at which monthly core PCE grew in January was already expected, it was higher than the growth rate of 0.2%, which is necessary for inflation to return sustainably to the 2% target.

The moderate slowdown in price pressures fails to move market expectations for rate cuts in the June meeting. Therefore, investors will shift focus to the testimony of Fed Chair Jerome Powell before Congress and the labor market data for February, which are scheduled for next week. This will provide meaningful insights into the interest rate outlook. 

But before that, the US Institute of Service Management (ISM) Manufacturing PMI data for February will be in the spotlight, which will be published at 15:00 GMT.

Daily Digest Market Movers: Gold price bounces back while US Dollar remains sideways

• Gold price is anticipated to deliver a positive close for the second straight week. 
• The precious metal remains slightly bullish even though investors hope that the expected decline in the United States core PCE Price Index data for January is insufficient to force Federal Reserve (Fed) policymakers to favor interest-rate normalization in the June policy meeting strongly.
• The annual core inflation growth rate was the lowest in three years, but monthly figures were up by 0.4% – twice the pace necessary for achieving price stability.
• As per the CME FedWatch tool, chances for a rate cut of 25 basis points (bps) in the June meeting remain almost unchanged at around 52% after the release of crucial inflation data. For the March and May meetings, investors see interest rates remaining unchanged in the range of 5.25%-5.50%.
• Meanwhile, the US Dollar Index (DXY), which gauges the US Dollar’s value against six major currencies, oscillates in a tight range around 104.20 after a solid recovery.
• On Thursday, New York Fed Bank President John Williams said the next move for us will be the interest rate cut, which he expects later this year. Williams added that monetary policy is in a good place, and he doesn’t see the need to raise interest rates again.
• Chicago Federal Reserve Bank President Austan Goolsbee also said that interest rates are pretty restrictive and our focus is on its duration. Goolsbee warned that the policy remaining restrictive could impact the labor market, which stayed resilient despite the aggressive rate-tightening campaign in 2022-2023.
• In today’s session, investors will focus on the ISM Manufacturing PMI data for February, which will provide insights into the US economic outlook.
• According to economists, Manufacturing PMI will show a rise of 49.5, from 49.1 in January. This will indicate that factory data remains below the 50.0 threshold for 16 straight months.