USD/CHF Trades With Mild Losses Below 0.9050 as Traders Brace for US PMI Release

Gold price gained some positive traction on Monday amid modest US Dollar weakness.

Bets that the Fed will cut rates again undermine the USD and benefit the XAU/USD pair.

Concerns about Trump’s tariff plans and a global trade war also support the commodity. 

Gold price (XAU/USD) kicks off the new week on a positive note and recovers further from over a three-week low, around the $2,833-2,832 region touched on Friday. Despite Friday's in-line US inflation data, traders continue to price in the possibility that the Federal Reserve (Fed) will cut interest rates by a quarter of a percentage point twice by the end of this year. This, along with the emergence of fresh selling around the US Dollar (USD), lends support to the non-yielding yellow metal.

Apart from this, concerns about the potential economic fallout from US President Donald Trump's tariff plans and geopolitical risk turn out to be other factors underpinning the safe-haven Gold price. However, the lack of follow-through buying warrants some caution before confirming that the XAU/USD's recent corrective pullback from the all-time peak has run its course. Traders might also opt to wait for this week's release of important US macro data scheduled for the beginning of a new month. 

Gold price is underpinned by bets for more Fed rate cuts and a weaker USD

The US Bureau of Economic Analysis reported on Friday that the Personal Consumption Expenditures (PCE) Price Index rose 0.3% in January and increased 2.5% over the past twelve months, down slightly from 2.6% in December. 

Adding to this, the core PCE Price Index, which excludes volatile food and energy prices, gained 0.3% last month and climbed 2.6% on a yearly basis in January, marking a notable deceleration from 2.9% in the previous month.

The report further revealed that US consumer spending unexpectedly dropped 0.2% last month, marking the first decline since March 2023 and the biggest decrease in nearly four years, fueling worries about the US growth outlook.

According to the CME Group's FedWatch Tool, market participants are pricing in the possibility that the Federal Reserve will resume cutting interest rates at the June policy meeting and lower borrowing costs again in September.

This comes on top of worries that US President Donald Trump's trade tariffs would undermine consumer spending and fail to assist the US Dollar to capitalize on a three-day-old recovery move from over a two-month low.

Trump confirmed that he will  impose tariffs on Canada and Mexico starting Tuesday and announced plans to double the 10% universal tariff on imports from China, raising the risk of a global trade war and benefiting the safe-haven Gold price. 

Traders now look to the US ISM Manufacturing PMI for some impetus later this Monday. Apart from this, other key US macro releases, including the Nonfarm Payrolls report on Friday, should influence the near-term USD trajectory.

Gold price technical setup warrants caution before placing fresh bullish bets

From a technical perspective, last week's breakdown below the 23.6% Fibonacci retracement level of the December-February rally was seen as a key trigger for sellers. Moreover, oscillators on the daily chart have just started gaining negative traction, and back prospects for an extension of the corrective pullback from the all-time peak. 

Hence, any subsequent move up might still be seen as a selling opportunity and remain capped near the $2,885 region. This is closely followed by the $2,900 mark, above which the Gold price could climb to the $2,934 intermediate hurdle en route to the record high, around the $2,956 region. 

On the flip side, Friday's swing low, around the $2,833-2,832 zone, now seems to protect the immediate downside, below which the Gold price could fall to 38.2% Fibo. level, around the $2,815-2,810 region. Some follow-through selling below the $2,800 mark would suggest that the commodity has topped out and could pave the way for deeper losses.

Source: FXSTREET

China’s manufacturing activity picked up last month, according to a private survey, indicating economic resilience in the face of US President Donald Trump slapping more tariffs on the Asian nation’s exports.

The Caixin manufacturing purchasing managers index rose to 50.8 in February from 50.1 a month earlier, Caixin and S&P Global said in a statement on Monday. That compared to the median forecast of 50.4 by economists. An official gauge of factory activity released on Saturday showed a return to expansion in February.

Any reading above 50 signals an expansion of activity, and a figure below that means contraction. 

The latest data comes as policymakers are expected to announce during a major meeting of the nation’s legislature this week that they will push China’s official budget deficit target to the highest in over three decades, pumping trillions of yuan into a system battling deflation, a property crash and a trade war with the US.

Thousands of delegates including ministry chiefs and provincial leaders will gather on Wednesday in Beijing for the conclave, where officials will set a bullish growth goal of around 5%, according to most analysts surveyed by Bloomberg. 

Economists have been calling for more stimulus, especially as the Trump administration takes aim at China with a series of moves involving investment, trade and other issues. It also plans an additional 10% tariff of Chinese shipments that is to take effect on Tuesday. China’s economy has been heavily reliant on exports for growth, irking some trade partners and prompting calls for bolstering the services sector.   

The Caixin results have been mostly stronger than the official poll over the past year. The two surveys cover different sample sizes, locations and business types, with the private poll focusing on small and export-oriented firms.

Source: Theedgemarkets

Japan's factory activity shrank for an eighth consecutive month in February, while worries about US protectionist trade policies weighed on firms' outlook, a private-sector survey showed on Monday.

The final au Jibun Bank Japan manufacturing purchasing managers' index (PMI) rose slightly to 49.0 from 48.7 in January, indicating the softest contraction in three months.

The index was slightly higher than 48.9 in the flash reading but stayed below the 50.0 threshold that separates growth from contraction for the eighth straight month.

"Firms often mentioned weakness in domestic and global manufacturing demand and confidence," said Usamah Bhatti at S&P Global Market Intelligence, which compiled the survey.

Firms cited muted demand conditions, particularly from the United States, Europe and China, according to the survey.

The key subindex of output shrank for the sixth straight month in February on softer global demand, but the pace of contraction eased from January.

New orders extended contraction, staying below the 50.0 threshold since mid-2023, with firms citing weak client confidence in Japan and the international market.

Japanese manufacturers stayed positive about their business outlook in February, though the level of optimism eased sharply from the previous month. Their expectations for the year-ahead outlook for output softened to the lowest since June 2020, the survey found.

US President Donald Trump's tariff threat against key trading partners have stoked uncertainty for investors and policymakers, as an escalating trade war could affect the global economy.

"Firms highlighted the potential downside risks of US protectionist trade policies and a slower-than-anticipated economic recovery," said Bhatti.

Employment levels stagnated in February, as a rise in staffing levels due to filling full-time vacancies was mostly offset by the non-replacement of voluntary leavers and retirements.

Input prices rose, driven by higher costs for raw materials, labour, and utilities, as well as exchange rate fluctuations. These higher operating costs prompted manufacturers to increase their selling prices at a faster pace.

Source: Theedgemarkets

EUR/GBP pauses its three-day losing streak, hovering around 0.8260 during Monday’s Asian session. The currency cross strengthens as the Euro (EUR) gains traction following reports that France and the United Kingdom (UK) have proposed a one-month truce in Ukraine.

In an interview with France's Le Figaro on Sunday night, French President Emmanuel Macron stated that France and Britain are advocating for a one-month ceasefire in Ukraine to halt all air and sea conflicts, as well as attacks on energy infrastructure. This announcement followed crisis talks in London, where European leaders reaffirmed their support for Kyiv, pledged increased security spending, and discussed forming a coalition to enforce any potential truce.

The Euro also found support from stronger-than-expected February flash Harmonized Index of Consumer Prices (HICP) data from Germany, released on Friday. Despite this higher inflation reading, the European Central Bank (ECB) is still expected to maintain its easing stance in Thursday’s policy meeting. Investors now turn their attention to the Eurozone’s HICP inflation data, set for release later today.

However, EUR/GBP’s upside could be limited as the Pound Sterling (GBP) remains supported by expectations that the Bank of England (BoE) will adopt a more measured approach to monetary easing compared to other major central banks.

Market sentiment suggests the BoE may proceed cautiously due to strong wage growth, with Average Earnings (excluding bonuses) in the three months ending December rising to 5.9%—the highest level since April 2024.

Source: FXSTREET

China is considering retaliatory measures on US agriculture and food products in response to tariffs from the Trump administration that are scheduled to take effect on Tuesday, according to the Global Times.

Beijing’s response will likely include tariffs and non-tariff measures, Communist Party-backed Global Times reported, citing a person they didn’t identify. China’s soymeal prices surged 1.5% on concerns that escalating trade tensions could disrupt US shipments of soybeans and tighten the market further.

President Donald Trump has pledged to double the levy on China to 20%, while also hitting Canada and Mexico with tariffs on March 4. The Asian nation is the world’s biggest importer of soybeans, which is typically crushed into cooking oil and animal feed, particularly for the country’s large pig herd.

China will “counter with all necessary measures to defend its legitimate rights and interests,” a spokesperson for the Chinese Ministry of Commerce said on Friday

Source: Theedgemarkets

The Indian Rupee gains traction in Monday’s Asian session. 

Foreign exchange intervention from the RBI might help limit the INR’s losses. 

India’s HSBC Manufacturing PMI and US ISM Manufacturing PMI will take center stage later on Monday. 

The Indian Rupee (INR) gathers strength on Monday. The potential intervention from the Reserve Bank of India (RBI) could provide some support to the local currency. On the other hand, the latest tariff rounds from US President Donald Trump on Canada, Mexico, and potentially China could boost the US Dollar (USD) and exert some selling pressure on the INR. Additionally, a recovery in crude oil prices could drag the Indian Rupee lower as India is the world's third-largest oil consumer. 

Looking ahead, traders will keep an eye on India’s HSBC Manufacturing Purchasing Managers Index (PMI) for February, which will be published later on Monday. On the US docket, the ISM Manufacturing PMI will be released. 

Indian Rupee rebounds despite Trump’s tariff threats

"Markets continue to live with the uncertainty and whiplash of the multitude of tariff proposals in the pipeline," said MUFG Bank. 

India’s real Gross Domestic Product (GDP) grew 6.2% YoY in the fourth quarter (Q4) of 2024, compared to a 5.6% growth (revised from 5.4%) recorded in the previous quarter, according to data released by the National Statistical Office (NSO) on Friday. This figure came in weaker than the 6.3% expected. 

The US Personal Consumption Expenditures (PCE) Price Index increased 0.3% in January, in line with expectations, the US Bureau of Economic Analysis showed on Friday. 

The US PCE Price Index climbed 2.5% YoY in January, compared to 2.6% in December. The core PCE Price Index, which excludes volatile food and energy prices, climbed 2.6% YoY in January, down from 2.9% in December. Both figures came in line with the market consensus. 

USD/INR sticks to positive bias in the longer term

The Indian Rupee trades in negative territory. The bullish outlook of the USD/INR pair prevails, with the price being well-supported above the key 100-day Exponential Moving Average (EMA) on the daily timeframe. Further upside looks favorable as the 14-day Relative Strength Index (RSI) is located above the midline near 63.75. 

The first upside barrier for USD/INR emerges at 87.53, the high of February 28. A bullish candlestick breaking above this level could lift the pair to an all-time high near 88.00 then 88.50. 

On the flip side, the initial support level for the pair is seen in the 87.05-87.00 zone, representing the low of February 27 and the round mark. A breach of the mentioned level could drag USD/INR to the next bearish targets at 86.48, the low of February 21, followed by 86.14, the low of January 27. 

Source: FXSTREET