Forex News

• Gold consolidates in the $4,200-$4,250 range ahead of the key Fed meeting.
• Federal Reserve likely to announce a rate cut next week, boosting Gold’s outlook.
• US Inflation gauge remains near 3%, yet money markets expect a Fed’s dovish policy stance.

Gold (XAU/USD) advances during the North American session on Friday, poised to finish the week almost flat above the $4,200 figure as market participants brace for the Federal Reserve (Fed) monetary policy meeting next week. At the time of writing, XAU/USD trades at $4,216 after bouncing off daily highs of $4,259.

XAU/USD trades flat; markets eye Federal Reserve’s expected rate cut

The week ends with the release of the Fed’s preferred inflation gauge, the Core Personal Consumption Expenditures (PCE) Price Index for September, which remained virtually unchanged, slightly closer to the 3% threshold than the Fed’s 2% goal. Although the print would justify a Fed hold, jobs data showing a cooling labor market and dovish comments by Federal Reserve officials suggest that a rate cut is most likely.

Recently, the University of Michigan revealed that American consumers grew slightly optimistic regarding the outlook of the economy. Worth noting that inflation expectations dipped, even though there is growing speculation that the impact of tariffs is yet to be felt.

On Thursday, a Reuters poll revealed that economists had priced in the December rate cut, a green light for Gold price to extend its rally.

As of writing, the CME's FedWatch tool indicates an 87.2% probability of a 0.25% reduction next week.

Daily market movers: Gold firms as US Treasury yields climb

• The US Dollar Index (DXY), which tracks the American’s currency performance against other six, is virtually unchanged at 98.93.
• The US 10-year Treasury note yield is up nearly four basis points, up to 4.141%. US real yields, which correlate inversely with Gold prices, are also rising two bps to 1.881%, a headwind for Bullion.
• The Core Personal Consumption Expenditures (PCE) Price Index — the Federal Reserve’s preferred inflation measure excluding food and energy — rose 0.2% MoM in September, matching August’s pace and market estimates. On a yearly basis, core PCE eased from 2.9% to 2.8%, reinforcing the view that underlying inflation continues to cool gradually.
• The University of Michigan Consumer Sentiment index for December improved to 53.3, topping expectations of 52 and rising from November’s final reading of 51. Survey Director Joanne Hsu noted that “consumers see modest improvements from November on a few dimensions, but the overall tenor of views is broadly somber.”
•  Inflation expectations moderated, with one-year expectations falling from 4.5% to 4.1%, while five-year expectations slipped from 3.4% to 3.2%, signaling a further easing in longer-term price concerns among households.

Technical Analysis: Gold price remains subdued post US Core PCE

Gold’s uptrend remains intact, but price action on Friday suggests that XAU/USD might consolidate within the $4,200-$4,250 range, ahead of the Fed’s meeting. Bullish momentum faded as depicted by the Relative Strength Index (RSI), which favors buyers, but it has turned flattish around the 61.00 level.

A break of the range to the upside clears the path to challenge $4,300 and the all-time high of $4,381. Conversely, a drop below $4,200 would expose initial support at the 20-day Simple Moving Average (SMA) at $4,124, followed by $4,100, and then the 50-day SMA at $4,059.

• AUD/USD climbs to its strongest level since September, with traders confident the RBA will hold rates next week.
• Fed’s dovish stance keeps the US Dollar under pressure, extending support for AUD/USD.
• Technical setup favors further upside, supported by rising momentum signals as RSI holds near 68 and ADX trends higher.

The Australian Dollar (AUD) extends its advance against the US Dollar (USD) on Friday, with AUD/USD climbing to its highest level since September 18 as traders are almost certain the Reserve Bank of Australia (RBA) will leave interest rates unchanged on December 9.

At the time of writing, AUD/USD is trading around 0.6637, on track for a second straight weekly gain.

The fundamental backdrop remains supportive for the Aussie, with markets also beginning to factor in the possibility that the RBA could revisit tightening next year if domestic conditions stay firm.

This stands in sharp contrast to the Federal Reserve’s (Fed) dovish outlook, which continues to weigh on the US Dollar and further supports AUD/USD.

From a technical perspective, the daily chart shows a strong breakout above a descending parallel channel earlier this week, signalling a clear shift toward a bullish structure.

The move higher has also pushed AUD/USD above the 21-day, 50-day and 100-day Simple Moving Averages (SMAs), which are now clustered near the upper boundary of the former channel, creating a solid support confluence in the 0.6550-0.6520 region in the event of a pullback.

As long as prices hold above this zone, the broader bias is expected to remain in favor of the bulls, while a break below it would risk a deeper correction and weaken the near-term outlook.

On the upside, 0.6650 is acting as the immediate resistance. A decisive close above this area would open the door toward this year’s peak at 0.6707, marked on September 17, which also stands as the year-to-date high and the highest level since October 2024. Beyond that, the psychological 0.6800 mark becomes the next bullish target if momentum continues to build.

Momentum indicators reinforce the improving tone. The Relative Strength Index (RSI) is holding near 68, approaching overbought territory but still reflecting firm upward momentum. Meanwhile, the Average Directional Index (ADX) has climbed toward 19, signalling that trend strength is beginning to recover after a subdued period.

• Gold erases earlier gains as a firmer US Dollar caps upside.
• Dovish Fed expectations and persistent geopolitical tensions continue to offer a supportive backdrop for Gold.
• Technically, XAU/USD needs a break above 4,250 to regain bullish traction, while 4,160-4,170 remains key near-term support.

Gold (XAU/USD) erases earlier gains on Friday as a firmer US Dollar (USD) tempers bullish momentum, with the metal oscillating within the familiar range that has defined price action this week.

At the time of writing, XAU/USD is trading near $4,215, with dovish Federal Reserve (Fed) expectations continuing to offer a supportive backdrop, helping limit downside despite the intraday pullback.

The US Dollar bounced off earlier lows after the delayed US Personal Consumption Expenditures (PCE) report for September offered no surprises. Core PCE, the Fed’s preferred gauge, rose 0.2% MoM, matching expectations, while the annual rate eased to 2.8% from 2.9%.

Headline PCE held steady at 0.3% MoM, matching the forecast and remaining unchanged from the previous month. On a yearly basis, the Index came in at 2.8%, in line with expectations and slightly above August’s 2.7%.

The broadly steady inflation readings did little to shift the policy outlook, with markets still largely convinced that the Fed will lower rates at next week’s monetary policy meeting.

Market movers: Fed outlook and Russia-Ukraine peace talks in focus

• Personal Income rose 0.4%, above the 0.3% forecast, while Personal Spending increased 0.3% in line with expectations, easing from August’s 0.5% rise. The preliminary University of Michigan survey improved in December, with the Consumer Sentiment Index rising to 53.3 versus a 52 forecast, up from 51, while the Expectations Index climbed to 55 compared with the 51.2 forecast, also up from 51.
• Recent US labour data show ADP Employment Change falling by 32,000 in November, sharply missing expectations for a 5,000 increase after a revised 47,000 gain in October. Challenger Job Cuts dropped to 71.3K from 153.1K, while Initial Jobless Claims declined to 191K, beating expectations for 220K and down from 218K last week.
• These labour indicators are among the few data points the Fed has ahead of its policy decision. October and November Nonfarm Payrolls will be released together on December 16, which comes after the meeting. The next key update before the decision will be next week’s JOLTS Job Openings report.
• According to the CME FedWatch Tool, markets assign about an 87% probability of a 25 basis point (bps) rate cut at the December 9-10 monetary policy meeting.
• Elsewhere, geopolitical tensions remain in focus as Russia-Ukraine peace efforts show little progress. The Kremlin described recent talks with US envoys as “encouraging,” yet key territorial disagreements persist, keeping uncertainty elevated and offering a layer of support for safe-haven assets such as Gold.

Technical analysis: XAU/USD needs a break above $4,250 to regain traction

XAU/USD continues to trade sideways after breaking out of a symmetrical triangle pattern, with a lack of follow-through buying keeping upside attempts capped near $4,250.

On the 4-hour chart, XAU/USD is hovering around the 21-period Simple Moving Average (SMA), reflecting a neutral short-term bias. However, the broader uptrend remains intact and any dips are still likely to attract buyers.

On the upside, a clear break above $4,250 is needed to revive bullish momentum, opening the door toward $4,300 and potentially a retest of the all-time high near $4,381.

On the downside, support is seen at the lower edge of the recent consolidation zone around $4,160-4,170, followed by the 100-period SMA near $4,141.

Momentum indicators paint a neutral-to-bullish picture. The Moving Average Convergence Divergence (MACD) histogram is narrowing toward the zero line while remaining slightly negative, indicating fading bearish pressure as the MACD line holds just below the signal line near the midpoint. The Relative Strength Index (RSI) around 58 signals steady momentum without strong directional conviction.

Dual central bank interest rate decisions from the U.S. Federal Reserve and the Bank of Canada on Wednesday top the week’s calendar, with the BoC expected to hold rates, while a third consecutive 25 basis point cut from the Fed looks highly likely, RBC's economists Nathan Janzen and Claire Fan report.

Trade data key for Canada ahead of rate decision

"Our base case forecast a month ago did not assume a December cut from the Fed, given inflation in the U.S. remains above the central bank’s 2% target, and Chair Jerome Powell’s comments at the last meeting about cautiously proceeding in a foggy environment. However, with an unusually divided FOMC committee, next week’s decision was always going to be a very close call. Fed communication over the last few weeks has also been leaning in the direction of a cut. With some softer data during the blackout, we doubt the hawks will put up a major fight."

"A hold by the BoC in comparison should be relatively uncontroversial. After October’s rate cut, policymakers signaled that “the current policy rate is about the right level” to deliver low, steady inflation while supporting growth through uncertainty. Delayed September Canadian trade data next week would need to show a 3.4% increase in merchandize export volume from August, and a 3.1% decrease in goods import volume in order to match the details in the third quarter GDP data from last week."

"More important still are the trade details from U.S. census bureau on whether CUSMA exemptions have continued to hold up to support Canadian exports to the U.S. in September."

• EUR/USD eases from daily highs as the US Dollar steadies following the latest batch of US economic data.
• US September PCE data broadly meet expectations, keeping the inflation outlook steady.
• Improving US consumer sentiment and softer hiring signals support the case for a dovish Federal Reserve.

The Euro (EUR) trims earlier gains against the US Dollar (USD) on Friday as the Greenback firms following the latest set of US economic releases. At the time of writing, EUR/USD is trading around 1.1635, easing from the daily high of 1.1628, though the pair remains on track for a second straight weekly gain as markets grow increasingly confident that the Federal Reserve (Fed) will cut interest rates next week.

The delayed US Personal Consumption Expenditures (PCE) report for September kept the overall inflation picture steady. Core PCE, the Fed’s preferred gauge, rose 0.2% MoM, matching expectations, while the annual rate eased to 2.8% from 2.9%. Headline PCE held steady at 0.3% MoM, matching the forecast and remaining unchanged from the previous month. On a yearly basis, the Index came in at 2.8%, in line with expectations and slightly above August’s 2.7%.

Beyond inflation, Personal Income increased 0.4%, beating the 0.3% forecast, while Personal Spending rose 0.3%, matching expectations and easing from August’s 0.5% gain.

The preliminary University of Michigan survey pointed to an improvement in consumer sentiment heading into year-end. The Consumer Sentiment Index rose to 53.3, above the 52 forecast and higher than the earlier reading of 51. The Expectations Index also strengthened, reaching 55, above the 51.2 forecast and rising from 51.

The 1-year inflation outlook fell to 4.1% from 4.5%, while the 5-year measure slipped to 3.2% from 3.4%.

Meanwhile, labour data released earlier this week showed a mixed picture. ADP Employment Change fell 32K in November, sharply missing forecasts, while Challenger Job Cuts dropped to 71.3K and Initial Jobless Claims declined to 191K.

Taken together, the steady inflation readings, easing consumer inflation expectations and softer hiring signals reinforce the case for a dovish Fed stance. According to the CME FedWatch Tool, markets assign about an 87% probability of a 25 basis point rate cut at the December 9-10 monetary policy meeting.

The US Dollar’s (USD) sharp H1 2025 drop could push investors toward broader portfolios, though geopolitics and Fed risks may keep the currency unsettled. Analysts now expect EUR/USD to swing widely in 2026, trimming the 12-month target to 1.18 while keeping a modestly bullish bias, Rabobank's FX analyst Jane Foley reports.

Geopolitics to drive EUR/USD volatility

"The sharpness of the USD’s plunge in H1 2025 could itself encourage investors to favour a more diversified portfolio going forward into 2026. That said, issues related to trade tensions, geopolitics, Fed independence and US growth and inflation risks can all be expected to impact the value of the greenback next year."

"Developments in all these topics have the capacity to both spook and reassure investors. With this in mind, our central view is that EUR/USD is likely to trade in wide choppy ranges in the year ahead, with only a modest upside bias."

"We have removed EUR/USD1.20 from our 12-month forecast table and instead have a 1-year forecast of 1.18, with the slight upturn in the direction reflecting the risks to the USD of a dovish FOMC and the possibility that the market could be speculating about the first ECB rate hike of the cycle by the end of next year. We have maintained our 1-to-3-month forecast of EUR/USD1.16."

The FOMC is expected to deliver a 25bp rate cut with potential dissents, reflecting the tension between inflation risks and weakening employment. Federal Reserve (Fed) Gov. Jerome Powell is likely to emphasize data-dependence heading into January, while the new dot plot may still underplay the policy influence of the incoming Trump administration, Rabobank's Senior US Strategist Philip Marey reports.

Powell expected to downplay policy split

"We expect the FOMC to make a 25 bps cut to the target range for the federal funds rate to 3.50-3.75% from 3.75-4.00%. We also expect dissents, possibly in opposite directions."

"At the press conference, Powell will probably downplay any dissent as something that follows from a challenging situation with upside inflation risk and downside employment risk. Regarding the January meeting, he is likely to stress that the Fed is data-dependent and makes decisions meeting-by-meeting."

"The new dot plot will be of interest, but may still underestimate the impact of the Trump administration on the Fed next year. Looking ahead to next year, we expect the Fed to continue its cutting cycle at least until their estimate of the neutral rate is reached."

• GBP/USD climbs above key moving averages, signaling potential for further gains.
• US inflation data and consumer sentiment support expectations for a Fed rate cut next week.
• Bank of England expected to lower rates in December, easing cost-of-living pressures.

GBP/USD resumes its uptrend on Friday, trimming some of Thursday’s losses as the US Dollar (USD) recovers some ground. Inflation data in the US kept steady the chances of a Federal Reserve (Fed) cut at the December meeting, weighing on the Greenback. At the time of writing, the pair trades at 1.3349, up 0.19%.

GBP/USD rallies as US Core PCE reaffirms Fed rate cut in December

The Core Personal Consumption Expenditures (PCE) Price Index, the Fed’s favorite inflation gauge, which excludes food and energy, rose by 0.2% MoM in September, unchanged from August and aligned with estimates. In the twelve months to September, it ticked lower from 2.9% to 2.8%.

At the same time, the University of Michigan Consumer Sentiment in December rose to 53.3, above estimates of 52 and up from November’s final reading of 51. Joanne Hsu, the Director of the Surveys of Consumer, noted that “consumers see modest improvements from November on a few dimensions, but the overall tenor of views is broadly somber.”

Americans' one-year inflation expectations in December dipped from 4.5% to 4.1%. For a five-year period, it decreased from 3.4% in November to 3.2%.

Given the backdrop, expectations for a 25 basis points (bps) Fed rate cut next week remained unchanged at 84%, as revealed by Capital Edge Rate Expectations Overview data.

After the data release, GBP/USD bounced towards 1.3350 after meandering around 1.3340 as the US Dollar tumbled to expectations of further easing.

In a note, Morgan Stanley said it expects a 25-bps cut in December, in January, and in April of 2026. They expect the Fed funds rate to end at 3%-3.25%.

The British Pound (GBP) shrugged off worries about last month’s budget, while business activity showed some improvement, according to S&P Global.

Despite this, the Bank of England is projected to reduce rates by 25 bps to 3.75% in the December 18 meeting after pausing its easing cycle in November.

GBP/USD Price Forecast: Technical outlook

GBP/USD seems capped by the 100-day Simple Moving Average (SMA) at 1.3365, even though the pair crossed above the 200-day SMA at 1.3326. Therefore, further consolidation lies ahead, and with the Fed's next meeting looming, a breach of the 100-day SMA is likely.

In that outcome, the next key resistance is 1.3400. Once surpassed, the next stop would be the October 17 high at 1.3471 ahead of 1.3500. On the flip side, GBP/USD’s drop below 1.3300 exposes the 50-day SMA at 1.3264, followed by 1.3200.