• Gold price struggles for direction ahead of Fed’s monetary policy announcement, ADP Employment Change data.
• The Fed is expected to deliver a steady interest rate decision while the future outlook on rates will be the main focus.
• Investors now see the Fed reducing interest rates from May. 

Gold price (XAU/USD) remains sideways as investors await the Federal Reserve’s (Fed) first monetary policy of 2024 and the ADP Employment Change data for January. The Fed is expected to deliver a steady interest rate decision for the fourth time in a row. Investors will keenly focus on the bank’s guidance – future expectation – for interest rates, and that will probably direct  action in the FX domain.

Amid easing price pressures, further quantitative tightening is not expected from the Fed, therefore, market participants will focus on “when and at what pace” the central bank will start reducing interest rates. Investors are anticipating that the Fed will commence the rate-reduction process from May. 

Previous Fed meeting guidance was for 75 basis points (bps) of cuts in interest rates in 2024. The market has been focusing on expectations for early cuts, however, comments from individual policymakers have been advising for keeping interest rates elevated at least for the first-half of the year – until they become confident that the underlying inflation rate will return to the Fed’s 2% target in a timely manner