The US inflation data brought important news for market players who have had a lot of confusion in relation to the future of the economy. The US stock futures have been trading lower ahead of this data as traders were concerned about this news potentially affecting interest rates and corporate earnings. The big question for traders is how the market will react now given that the economic data—which is one of the most important pillars for the Fed's policy—is already out. However, today, we have also seen the US jobless claims numbers come in higher than expected, causing some uncertainty in the market.

Background

US stock makes have been trading lower since morning as traders didn't want to trade big ahead of important US economic numbers—the US CPI data and the US jobless claims. Earlier this week, we had the FOMC minutes, which confirmed that there is a clear division among the FOMC members regarding how much the next interest rate cut should be. Many have been closely watching these economic indicators for any hints on the future direction of monetary policy. After all, the Fed has two important functions: to promote maximum employment and to maintain stable prices.

US Jobless Claims Data was released yesterday, providing a key insight into the state of the labour market. The US weekly unemployment claims came in at 258K against the forecast for 231K, while the previous number stood at 225K. The number has clearly shown that more people have actually filed for unemployment claims, which is indicative of a potential increase in job losses.

As for the US CPI numbers, they have shown the readings that not many wanted to see. Basially, the US CPI month over month number came in at 0.3%, while the forecast was for 0.2%. The bad news didn't stop here only, as the US CPI y/y number was highly disappointing as well. The number came in at 2.4% against the forecast of 2.3%. One could argue that the number was going to see some correction, and this is the correction that was expected. However, the fear is that if this becomes a trend, which means that we see the US CPI numbers moving in the wrong direction, that would create huge problems for the Fed. So far the expectations have been that the Fed will cut the interest rates by 50 basis points, but after the US jobs number the expectations for those deviated. The big blow to expectations of a rate cut of 50 basis points really came in the shape of this data, as this has confirmed now that the Fed is under no pressure to cut the rates by higher amounts.

What Does This Mean For The Gold Price?

The gold prices are still very much anchored in place, and this despite the fact that we have seen strength in the dollar index on the back of the US economic data confirming the low likelihood of the Fed cutting interest rates by 50 basis points.

This suggests that traders are not solely trading gold based on the correlation between the dollar index and the gold price. In fact, traders are looking for safe haven assets to park their wealth, with the focus firmly on the geopolitical tensions.

From a technical price perspective, gold is trading slightly above the 50-day moving average, which could signal a bullish trend. However, analysts are cautious about potential pullbacks in the near future as the current price lacks momentum. But the fact of the matter is that as long as the price continues to trade above the 50-day SMA, investors may still see positive gains in the market.

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