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On Tuesday, Iran launched missiles towards Israel, driving demand for safe-haven assets like gold and currencies like U.S dollar, while the U.S. dollar also firmed on data highlighting a resilient U.S. labor market. Gold surged by 1.09%, closing at $2,663 per ounce, and the U.S. Dollar Index rose 0.45%, ending the session at 101.21. 

(Gold Daily Price Chart, Source: Trading View) 

(DXY Daily Price Chart, Source: Trading View) 

The missile strikes were in retaliation for Israel’s military campaign against Hezbollah, Tehran’s ally in Lebanon. In response, U.S. President Joe Biden ordered the U.S. military to assist Israel’s defence efforts, including shooting down missiles targeting Israel, according to the White House National Security Council. 

Additionally, U.S. economic data released on Tuesday showed continued strength, a day after Federal Reserve Chair Jerome Powell downplayed the chances of a 50-basis-point rate cut at the central bank’s upcoming meeting. U.S. job openings unexpectedly increased in August after two months of declines, although hiring remained consistent with a gradually slowing labor market. 

Moreover, Powell signaled on Monday that the Federal Reserve would likely stick with smaller, quarter-percentage-point rate cuts rather than larger moves, given that recent data has reinforced confidence in ongoing economic growth and consumer spending. While the possibility of a 50-basis-point cut has not been entirely ruled out—particularly if economic conditions deteriorate—Powell suggested that markets may be overly optimistic about such a cut happening. As a result, traders are weighing the probability of a 50-basis-point cut at the Fed’s Nov. 6-7 meeting. 

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