Gold, EUR/USD, GBP/USD, USD/JPY; Eurozone Inflation, US Core PCE

Most read: EUR/USD Trade Setup – Bullish continuation depends on resistance breaking

The new week will start slowly, as the US and UK markets will be closed on Monday – the former for Memorial Day and the latter for a public holiday. Holidays in these financial centers mean lower trading volume, which could cause prices to move slowly. But there’s a catch: Limited liquidity can sometimes amplify price movements if unexpected news is released, with fewer traders available to absorb buy and sell orders. That said, caution is advised for those who still decide to trade on Monday.

As we progress through the week, we expect a relatively quiet period with few high-impact events likely to trigger significant volatility. However, the landscape could change on Friday with the release of critical economic indicators. On one side of the Atlantic, May CPI figures for the Eurozone will be released. Across the Atlantic, we’ll get data on consumer spending, the Federal Reserve’s most closely watched inflation indicator.

Curious to know the US Dollarshort-term prospects? Explore all the information available in our quarterly forecasts. Request your free guide today!

Eurozone

The European Central Bank is expected to cut borrowing costs by a record 4% at its next meeting in June. However, the size of additional rate cuts will depend on the inflation outlook. In this sense, the May CPI Flash report will be crucial, offering valuable insights into recent price trends within the regional economy, which will play a central role in shaping the trajectory of monetary policy.

Analysts expect euro zone inflation to rise to 2.5% year-on-year this month, from 2.4% in April, with the benchmark indicator expected to remain stable at 2.7%. . The slight rise in the headline indicator may not deter the ECB from pulling the trigger next month, but an upside surprise could prompt the institution to take a more cautious approach to future easing. In light of these developments, Euro currency pairs may be subject to increased volatility heading into the weekend.

You want to know where is euro perhaps it will be headed in the coming months? Explore all the information available in our quarterly forecasts. Request your free guide today!

WE

Baseline PCE deflator data will also be released on Friday. Consensus estimates suggest a 0.3% increase in April, with the annual rate cooling to 2.7% from 2.8, marking a small but favorable directional move. A downside surprise could revive optimism that the disinflationary trend, which began in late 2023 but stopped earlier this year, is back on track, strengthening the case for a softer stance for the FOMC at some point during the fall. This should be bearish for the US dollar but positive for stocks and gold.

Conversely, if inflation numbers exceed forecasts, interest rate expectations could move in a hawkish direction, delaying the Fed’s timeline for initiating rate cuts. In this scenario, November or December could become the new reference for a possible decision by the American central bank. Such a move could propel bond yields and the greenback higher, creating a more challenging environment for stocks and precious metals.

For an in-depth look at the variables that could impact financial markets in the coming week, explore the comprehensive forecasts and analysis offered by the DailyFX team. Our expert analysis can enable you to navigate a dynamic market environment and make sound trading decisions.

For an in-depth analysis of gold’s fundamental and technical outlook, download our free quarterly trading forecasts now!

FUNDAMENTAL AND TECHNICAL FORECASTS

British Pound Weekly Forecast: Lack of local cues could lead to downward drift

The British pound largely shrugged off the UK election announcement, with economic fundamentals still very much in play.

Gold Price Forecast: Bearish bias is in place for now, but PCE fundamentals remain key

This article delves into the fundamental and technical outlook for gold, with a particular focus on analyzing price action dynamics and potential scenarios following the release of US PCE data later this week.

US Dollar Forecast: PCE inflation data key as EUR/USD and USD/JPY await catalyst

The US Dollar may prove resilient ahead of crucial PCE inflation data, while EUR/USD looks for catalysts and USD/JPY maintains its uptrend. Traders are looking to German and European inflation figures for guidance.