Silver loses shine as traders brace for key US data

The price of silver (XAGUSD) faces some selling pressure near $27.90 in early European trading on Wednesday. The renewed Dollar demand weighs on the USD-denominated silver price.

Traders will take more cues from the highly-anticipated US Nonfarm Payrolls (NFP) on Friday, which might influence the white metal price.

China’s services activity growth slowed in August despite the summer travel peak.

The Chinese Caixin Services Purchasing Managers’ Index (PMI) dropped to 51.6 in August from 52.1 in July, weaker than the estimation of 52.2. This report and another PMI report over the weekend added concerns about the economic slowdown and deterioration of demand in China, which exert some selling pressure on silver price as China is the world’s top silver exporter.

The imminent Federal Reserve rate cuts might underpin the precious metal in the near term as it makes silver cheaper for most buyers.

Markets are now pricing in nearly 61% possibility of a 25 basis points (bps) rate cut by the Fed in September, while the chance of a 50 bps reduction stands at 39%, according to the CME FedWatch tool.

The August NFP report on Friday will be more significant than usual and might offer some hints about the size and pace of the Fed rate cut.

The US economy is expected to see 163,000 job additions in August, while the Unemployment Rate is expected to tick lower to 4.2%. In case of the weaker-than-expected reading, this might prompt speculation of the looming US recession and deeper rate cuts, which could boost the silver price.

(Source: OANDA)