Gold kicks off the 2024 year on a promising note, demonstrating a firm-footing amid prospects of a reduction in interest rates by the Fed starting in March.

Factors that are boosting rate-cut hopes are significant progress in the underlying inflation declining towards 2% and easing labor market conditions due to restrictive conditions.

This week brings various economic indicators in the form of ISM manufacturing PMI, JOLTS Job data, FOMC minutes, Services PMI and Nonfarm Payrolls on Friday.

Market participants are unlikely to change the broader bearish stance for the US dollar and treasury yields with expectations of rate cuts later this year.

EUR/USD is down to start the week and has lost steam the past 4 sessions. The pair finished the year up by 3.16% after 2 years of decline. The USD is gaining momentum in thin market conditions, but data releases should set the tone for the rest of the month.

GBP/USD is down on the day and is being weighed down by broad US dollar strength. The UK saw a weaker than expected S&P Global Manufacturing PMI for December. The print came in at 46.2 and a number below 50.0 indicates contraction in economic activities. This number has been below 50 for the last 17 months.

USD/CAD is rising to start the week as US Treasury yields are ticking up a bit helping the rise but an uptick in crude oil prices can be seen to cap this upside. Let’s see what the week brings. The Bank of Canada Governor Tiff Macklem has said the bank could start to look at cutting rates sometime in 2024. This will leave the Loonie at the mercy of oil price fluctuations and sentiment surrounding the US dollar.

USD/MXN is losing some ground on the day after 2 days of profits. General dollar strength and improvement is the theme across pairs. Softer economic date coming out of Mexico may provide some relief to the Bank of Mexico regarding the need for further tightening of monetary policy.