Market participants believe that Friday's data on the US nonfarm payroll can become a factor positively influencing the rate increase. According to the forecast, the number of jobs in the U.S. will rise by 172 000 in September and unemployment rate will remain unchanged at the level of 4.9%.
According to the data released on Thursday, the number of initial claims for unemployment benefits in the U.S. fell to the lowest level for four decades (249 000) last week, which is a sign of improvement in the US economy. Earlier this week the data on the production and service sectors become known, which was above expectations.
Fed Cleveland President Loretta Mester has said at the beginning of this week that a minor increase in rate will be relevant and it can happen at one of the meetings of the Central Bank scheduled for this year. The same opinion was expressed by Fed Richmond President Jeffrey Lacker. On Wednesday, MR Lacker has said that current economic situation is favorable for the rise in the interest rate.
According to the futures on the Fed interest rate, probability of the rate hike in December is now at the level of 64%. Yesterday the USD index WSJ went up by 0.5% to 87.49.
If nonfarm pay roll will be positive, the pair XAU/USD will probably continue to decline.
Otherwise, the USD will be actively sold out in the foreign exchange market.
Meanwhile the USD remains the favourite of the currency market.
If the US labor market will be positive, as expected, probability of the rate hike in the U.S. will significantly increase, which will be a negative factor for the price of gold. In case if the interest rate increase gold is losing investment attractiveness, giving way to the USD and safer assets, such as government bonds.
The rise in the USD decreases the attractiveness of gold for the holders of the other currencies, as gold prices are denominated in U.S. currency, and the borrowing costs for its acquisition and storage are growing.
At 15:30 GMT+3, traders shall be extremely cautious as volatility can sharply increase.
Often the movement in major currency pairs with the USD reaches more than 2 patterns and then sharply rebounds.