Gold prices declined by 0.57% as US inflation rose to 2.7% year-on-year, the fastest pace in five months. This complicates the Federal Reserve’s cautious stance on interest rates, with Trump calling for rate cuts while Fed officials signal a more measured approach. The focus now shifts to the Producer Price Index report for further insight on inflation. A higher-than-expected reading could reinforce the Fed’s cautious stance, while a softer reading may support gold prices.

The euro fell to 1.16500 after the US CPI report, which showed softer readings on core inflation. This data supports the Fed’s cautious approach to interest rate cuts, with Dallas Fed President Lorie Logan emphasizing the need to anchor inflation amid tariff pressures. Investors now expect a more measured approach to US monetary policy, lowering the probability of multiple rate cuts this year. Further data will be crucial in assessing inflation trends and trade policy impacts.

The Australian dollar strengthened to 0.65300, breaking a three-day decline ahead of Thursday’s labor data release. The RBA’s data-dependent approach suggests that any significant deviation in employment figures could influence their policy decisions. Consensus forecasts predict 20,000 jobs added in June, with the unemployment rate expected to hold steady at 4.1%. A strong labor report may challenge expectations of a rate cut next month, supporting the Australian dollar in the near term.

Read more at Investing.com: Gold Falls for 2nd Day as US CPI Hits 5-Month High