EURUSD
- The U.S. Bureau of Labor Statistics will release the July employment survey on Friday, and the U.S. economy is expected to have added 200,000 jobs last month, following a gain of 209,000 jobs in June.
- The US Dollar and Dollar Index (DXY) faced a slight pullback as Fitch Ratings Agency downgraded the U.S. to AA+ from AAA. This downgrade impacted the dollar's strength.
- Wednesday's U.S. economic news was bullish for the dollar after the Jul ADP employment change rose +324,000, indicating a stronger labor market than expectations of +190,000.
- On Wednesday, the EUR/USD fell by -0.39% and dropped to a 3-1/2 week low. The euro faced pressure from a stronger dollar.
- A decline in European government bond yields on Wednesday weakened the euro's interest rate differentials, further impacting the EUR/USD.
| SMA (20) | Slightly Rising |
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| RSI (14) | Slightly Falling |
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| MACD (12, 26, 9) | falling |
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Closing statement: The EUR/USD pair experienced a decline as the US Dollar showed some strength despite the slight pullback after Fitch Ratings downgraded the U.S.'s top-tier sovereign rating. Positive economic news in the U.S., with a stronger-than-expected Jul ADP employment change, added to the dollar's bullish momentum. The euro faced pressure, and the EUR/USD dropped to a 3-1/2 week low, influenced by the weakening interest rate differentials due to declining European government bond yields. The upcoming release of the July employment survey in the U.S. will be crucial in shaping the direction of the currency pair.
GBPUSD
- The upcoming Nonfarm Payrolls (NFP) report will play a pivotal role in determining the strength or weakness of the U.S. dollar. The report's data relative to consensus estimates will heavily influence the currency pair.
- GBP/USD is currently trading around 1.2700 and remains relatively stable with little significant movement as traders await key events. The pair recently dropped below the 20 and 50-day simple moving averages, signaling potential bearish pressure.
- Sterling traders are closely monitoring Thursday's Bank of England (BoE) policy decision, with market expectations of a 25-basis point rate hike. If implemented, this would push UK borrowing costs to their highest level in 15 years.
- Alongside the rate decision, the Bank of England will publish their quarterly Monetary Policy Report, providing insight into the central bank's latest economic analysis and inflation projections. This report will have significant implications for GBP/USD.
- The currency pair's movement is currently influenced by uncertainties surrounding the NFP report and the upcoming BoE policy decision and report.
| SMA (20) | Neutral | ||||
| RSI (14) | Slightly Falling | Falling | |||
| MACD (12, 26, 9) | Falling |
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Closing statement: GBP/USD remains steady around 1.2700 with the upcoming NFP report being a critical determinant for the U.S. dollar's strength. The currency pair recently broke below the 20 and 50-day simple moving averages, indicating potential bearish pressure. Traders are closely focused on the Bank of England's policy decision, with expectations of a rate hike that could impact UK borrowing costs significantly. The central bank's Monetary Policy Report will provide valuable insights, adding to the overall sentiment around GBP/USD.
GOLD
- Gold prices edged lower on Thursday, reflecting concerns over the resilient U.S. economy and job market, which raised fears of rising interest rates. These fears reduced safe-haven demand for gold.
- Despite Fitch's cut to the U.S. sovereign rating, gold saw little safe-haven demand as investors' risk aversion primarily affected other financial markets.
- The Federal Reserve emphasized its commitment to a data-dependent approach in making future decisions and determining the broader normalization outlook. This approach makes interest rate expectations sensitive to economic data.
- The forthcoming employment data, particularly job and earnings growth, will be crucial in shaping interest rate expectations. Stronger-than-anticipated employment figures could lead to a more hawkish stance, while weak employment gains may have the opposite effect.
- Gold prices were nursing steep losses for the week, partly influenced by the market's focus on the U.S. economic outlook and potential interest rate adjustments.
Closing statement: Gold prices edged lower as the focus on a resilient U.S. economy and job market raised concerns over rising interest rates, reducing safe-haven demand. Despite Fitch's U.S. sovereign rating cut, gold did not see significant safe haven buying. The Federal Reserve's data-dependent approach to policy decisions added to the uncertainty. The market closely awaits the forthcoming employment data, which will likely play a critical role in shaping interest rate expectations and influencing the direction of XAU/USD.
CRUDE OIL
- Crude oil prices were little changed on Thursday following a two-day decline, influenced by a U.S. government credit downgrade that dampened market sentiment. However, concerns about supply tightness provided some support to prices.
- Despite trading near their highest levels since April on Wednesday, both WTI and Brent crude closed down 2% after the U.S. credit downgrade. July saw significant gains, with WTI rising nearly 16% and Brent gaining over 14%.
- The supply situation was highlighted by a record 17-million-barrel drop in U.S. crude stockpiles last week, indicating strong demand and outpacing supply. Refiners' increased runs and exports surpassing 5 million barrels per day contributed to the decline in inventories.
- The significant inventory drawdown, exceeding analysts' expectations, points to global demand outpacing supply, especially as major producers continue deep production cuts to support the market.
- The next market monitoring committee meeting of the Organization of the Petroleum Exporting Countries and Allies (OPEC+) is scheduled for August 4. Investors will closely watch for any decisions or announcements regarding production adjustments.
| SMA (20) | Rising |
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| RSI (14) | Slightly Falling |
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| MACD (12, 26, 9) | Slightly Falling |
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Closing statement: Crude oil prices remained stable on Thursday, recovering from a two-day decline triggered by the U.S. government credit downgrade. Despite this downgrade affecting market sentiment, concerns about supply tightness provided some support. The record drop in U.S. crude stockpiles signaled strong demand outpacing supply, further supported by deep production cuts from major producers. The upcoming OPEC+ meeting on August 4 will be a key event to watch for any potential decisions impacting crude oil prices.
DAX
- European stock markets are expected to open largely unchanged on Thursday as investors exercise caution ahead of key events, including the Bank of England rate decision, inflation data, services activity data, and a wave of corporate earnings reports.
- DAX futures in Germany traded 0.21% lower, CAC 40 futures in France dropped 1.26%, while the FTSE 100 futures contract in the U.K. declined 0.21%, reflecting mixed sentiment across European markets.
- Trade data from Germany and France are due, while the eurozone Producer Price Index (PPI) release for June is expected to confirm a retreat in inflation.
- BMW raised its full-year guidance after a strong first half of the year, while Germany's Merck warned of steeper earnings decline due to a slump in demand for materials used in pharmaceutical and semiconductor production.
- Adidas AG reported a 5% sales decline in the second quarter, but the release of Yeezy shoes boosted its profit margin, narrowing the projected loss.
| SMA (20) | Slightly Rising |
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| RSI (14) | Falling |
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| MACD (12, 26, 9) | Falling |
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Closing statement: The European stock markets, including the German DAX, are facing bearish sentiment amid concerns about slowing economic growth. The surprise downgrade of the U.S.'s top-tier sovereign rating by Fitch has added to risk aversion. Despite some positive signals in the German labour market, the overall market sentiment remains cautious, and investors are closely watching the performance of key companies like Siemens Healthineers and Vonovia in the DAX index. The unfolding economic data and corporate results will guide the market's direction in the coming days.