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16/07/2024 - 07:22 UTCThe U.S. dollar was trading between gains and losses against most majors in the last past few sessions, with the dollar index (USDX) showing little movement, fluctuating within a tight range between levels 103.71 and 104.25. Markets are anticipating a potential interest rate reduction after Fed president Jerome Powell, on Monday, signaled the bank's growing belief that inflation is on the decline. While he didn't explicitly mention rates, his dovish remarks were interpreted as a hint of an imminent policy change.
The CME FedWatch tool shows a surge in expectations for a September rate cut, with the probability now at 89.4%. Conversely, November rate cut expectations have plummeted to 30.3%, down from over 50% last week.
Gold prices rose in Asian trade on Tuesday, coming within sight of new highs amid increased bets that the Federal Reserve will begin cutting rates from September. But gains in gold were limited by some resilience in the dollar, as speculation intensified about a potential victory of Trump in the upcoming U.S. elections.
Bitcoin surged for a second consecutive day on Monday, adding another 6.47% to its value while Ethereum was up by 7.35%. Investors are now looking for more confirmation that the trend has indeed reversed to the upside. The overall cryptocurrency market capitalization stands at 2.42 trillion dollars early on Tuesday, up from 2.2 trillion seen last week.
The US 30 and the US 30 closed at record levels on Monday on increased bets for a September rate cut following recent comments by Jerome Powell suggesting the Fed is encouraged by recent inflation data. In corporate news, Goldman Sachs climbed more than 2% after reporting a more than doubling of profit in the second quarter and Apple rose more than 1% after Loop Capital upgraded its rating on the company to buy.
Focus for today could be on a testimony by Fed member Kugler at the National Association of Business Economists along with US retail sales and CPI data from Canada.
The EUR/USD experienced a setback from its recent upward movement, retracting sharply after briefly surpassing the 1.0900 mark at the beginning of the new trading week.
Federal Reserve Chairman Jerome Powell commented on the recent developments in inflation on Monday, and made some encouraging remarks that indicate inflation is cooling.
The upcoming release of US Retail Sales data later today will mark the conclusion of the recent series of significant US economic data releases.
Market participants are also waiting for the European Central Bank (ECB)'s latest rate call on Thursday. While a follow-up rate cut to June's quarter-point reduction is anticipated, it is not expected until September.
Gold prices rose on Monday following three weeks of consecutive gains, but dipped from the daily high after Federal Reserve Chairman Jerome Powell maintained a cautious stance and refrained from offering forward guidance.
The price of the yellow metal began Monday's session slightly lower in the wake of the recent attack on Trump, which was seen as potentially strengthening his chances in the upcoming November election.
Meanwhile, Powell's speech at The Economic Club was largely uneventful. He remarked that the economy has shown "remarkable" performance, noting that the labor market is not as tight as during the pandemic. Powell also indicated that the Fed will not necessarily wait until inflation hits 2% to implement rate cuts but emphasized the importance of being confident in the downward trajectory of inflation before taking action.
Oil prices closed lower on Monday due to disappointing growth data from China, which dampened optimism about future demand. However, the downward movement was limited by ongoing expectations of a U.S. rate cut in September.
Worries about dwindling oil demand in China, the world's largest importer, were amplified by the release of gross domestic product (GDP) data, indicating that the economy grew less than anticipated in the second quarter. Furthermore, China's crude oil imports decreased by 2.3% in the first half of this year to 11.05 million barrels per day, reflecting disappointing fuel demand.
The focus has now shifted to the Third Plenum of the Chinese Communist Party, which is scheduled to commence this week, as analysts seek further insights into the state of the economy.
On Monday, Wall Street concluded the trading day on a positive note, driven by mounting expectations of a second term for Donald Trump following a failed assassination attempt. This raised optimism for a potentially more relaxed regulatory environment.
Additionally, speculations about the U.S. Federal Reserve initiating a cut to its key interest rate as early as September further fuelled risk appetite. Federal Reserve Chairman Jerome Powell expressed confidence in the Fed's ability to tackle inflation, hinting at impending rate cuts.
Noteworthy earnings reports included Goldman Sachs, which saw its stock price rise by over 2% after announcing a more than twofold increase in profit during the second quarter. Looking ahead, Bank of America and Morgan Stanley are scheduled to release their earnings today, while ASML, a major chipmaker, is due to report on Wednesday, and tech giant Netflix will disclose its earnings on Thursday.
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