Palladium prices rose on Friday as the dollar trades flat against major rivals, while traders assess demand from the automotive sector. 

Usages and Applications 

The automotive industry is the major consumer of palladium, specifically to process exhaust fumes in catalytic converters. 

Palladium recently lost some of its sheen due to increased demand on EV cars worldwide. 

However, a supporting point for palladium is the decreasing share of diesel cars in the market compared to gasoline cars, which rely more on palladium converters. 

Palladium also plays an important role in the hydrogen energy industry, as palladium can be used to catalyze chemical processes in fuel cells. 

The addition of palladium to fuel cell systems improves performance and increases stability and positive activity. 

Price Factors

Dollar is a major factor determining palladium prices, with the dollar index declining to 103.4 as of 13:45 GMT, with a session-high at 103.4, and a low at 103.3. 

Recent data showed the US labor and real GDP markets surging strongly in the first quarter of the year, underpinning the greenback. 

On trading, palladium futures due in June rose 1.4% to $1093.5 an ounce as of 13:46 GMT. 

Dollar rose in European trade on Friday against a basket of major rivals, extending gains for the second day and hitting a week high and on track for the biggest weekly profit in two months following hot US inflation data.

US inflation data released this week showcased the ongoing inflationary pressures on Fed policymakers and bolstered the case for maintaining interest rates at current levels for an extended duration this year.

The Index

The dollar index rose 0.1% to 103.49, the highest in a week, with a session-low at 103.31, after closing up 0.75% yesterday, the largest profit since February 2, following US producer prices and unemployment claims data. 

Weekly Trades

The dollar index is down 0.7% so far today, on track for the first weekly profit in a month, and the largest since January.

Scorching US Inflation Data 

Recent data showed US consumer prices rose 3.2% y/y in February, above estimates of 3.1%.

Core prices rose 3.8% in February, above estimates of 3.7%. 

Producer prices rose 1.6% in February, up from 1% in January, marking the fastest increase since September 2023. 

On a monthly basis, producer prices rose 0.6% last month, up from 0.3% in January. 

US Rate Prospects

Following the data, the odds for a 0.25% Fed interest rate cut in May fell to 12%, while the odds for such a cut in June fell to 60%. 

Traders are still pricing in 75 basis points of interest rate cuts by the Federal Reserve this year. 

Gold prices rose mildly in European trade on Friday as US treasury yields stalled, however, the precious metal is on track for the first weekly loss in a month on hot US inflation data. 

US consumer and producer prices data were above estimates, in turn hurting the odds of early US interest rate cuts this year.

Gold Prices Today 

Gold prices rose 0.35% to $2170 an ounce, with a session-low at $2160, after losing 0.55% on Thursday, the second loss in three days following bullish US data data. 

Weekly Trading

Gold prices are down 0.5% so far this week on track for the first weekly loss in a month on profit-taking off a record high at $2195. 

US Yields

US 10-year treasury yields declined 0.5% on Friday off two-week highs at 4.300% on profit-taking, in turn offering support for non-yielding assets. 

The yields surged on Thursday by the most amount since February 13 following strong US producer prices data. 

US inflation data released this week showcased the ongoing inflationary pressures on Fed policymakers and bolstered the case for maintaining interest rates for an extended duration this year.

Hot US Inflation 

Recent data showed US consumer prices rose 3.2% y/y in February, above estimates of 3.1%.

Core prices rose 3.8% in February, above estimates of 3.7%. 

Producer prices rose 1.6% in February, up from 1% in January, marking the fastest increase since September 2023. 

On a monthly basis, producer prices rose 0.6% last month, up from 0.3% in January. 

US Rate Prospects

Following the data, the odds for a 0.25% Fed interest rate cut in May fell to 12%, while the odds for such a cut in June fell to 60%. 

Traders are still pricing in 75 basis points of interest rate cuts by the Federal Reserve this year. 

The SPDR

Gold holdings at the SPDR Gold Trust remained flat yesterday at 816.86 tonnes. 

Euro fell in European trade on Friday against a basket of major rivals, sharpening losses for the second day against the dollar and plumbing a week low, as markets expect US interest rates to remain high for longer than European rates. 

Recently, the odds of an early interest rate cut by the European Central Bank in April or June surged, while the odds for such a cut by the Federal Reserve tumbled. 

EUR/USD

EUR/USD fell 0.1% to 1.0873, with a session-high at 1.0886, after closing down 0.6%, the first loss in three days following strong US producer prices and unemployment claims data. 

Weekly Trades

The pair is down 0.6% so far this week, on track for the first weekly loss in a month on renewed concerns about the widening interest rate gap between Europe and the US.

Declining Outlook 

The SEB banking group said in a research memo that the time is prime for the EUR/USD pair to decline in upcoming weeks.

The group’s analysts are pointing to the conditions supporting an earlier interest rate cut in Europe compared to the US as a basis for their prediction. 

The analysts believe that a breach of the recent range will underpin the dollar throughout the spring, with the group now expecting the EUR/USD to hit 1.07 in about a month before rebounding back to 1.10 in the fourth quarter.  

As the Federal Reserve prepares to launch its own policy easing, likely from June, it’s expected that the euro will gain momentum on the dollar and recoup all of its recent losses.