EURUSD
- EUR/USD experienced a slight decline, reaching 1.0886, following the release of data showing a 0.2% drop in German industrial production in May. This indicates ongoing struggles in the industrial sector of the eurozone's largest economy.
- The European Central Bank (ECB) has indicated its intention to raise interest rates again later this month as it seeks to address elevated inflation levels.
- The U.S. dollar traded largely unchanged during early European hours on Friday and is set to achieve modest gains for the week. Robust labor data, including the monthly payrolls report, have raised the possibility of the Federal Reserve maintaining higher interest rates for an extended period.
- Market attention now turns to the highly anticipated monthly nonfarm payrolls report, which is expected to provide further insights into the intentions of Federal Reserve policymakers. Analysts predict an increase of 225,000 jobs in June, following the rises of 339,000 in May and 294,000 in April.
| SMA (20) | Rising |
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| RSI (14) | Slightly Falling |  | ||
| MACD (12, 26, 9) | Slightly Falling | |
Closing statement: EUR/USD experienced a slight decline due to disappointing German industrial production data, highlighting ongoing challenges in the eurozone's largest economy. The European Central Bank remains committed to raising interest rates further to address elevated inflation. The U.S. dollar traded flat but is poised for modest gains following robust labour data. Traders eagerly await the release of the monthly nonfarm payrolls report to gain further clarity on Federal Reserve policymakers' intentions regarding interest rates.
GBPUSD
- GBP/USD experienced a slight decline, reaching 1.2729, after reaching a two-week high of 1.2780 on Thursday. The Bank of England is expected to raise interest rates as U.K. inflation remains the highest among developed economies.
- Inflation expectations for the U.K., as indicated by one-year ahead CPI expectations, decreased to 5.7% in June from 5.9% in May. Additionally, firms' perception of current CPI decreased to 8.9% from 9.8% in May.
- The DXY, which tracks the dollar against six major currencies, traded flat around 103.165 and is still poised to record a slight gain for the week.
- Recent data revealed that ADP private payrolls in the U.S. surged in June, marking the largest increase since February 2022. However, the number of Americans filing new claims for unemployment benefits showed a moderate increase last week.
| SMA (20) | Rising |
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| RSI (14) | Neutral | |||
| MACD (12, 26, 9) | Neutral |
Closing statement: GBP/USD retreated from its two-week high as the Bank of England is expected to raise interest rates given the high U.K. inflation compared to other developed economies. Inflation expectations in the U.K. decreased slightly. The DXY traded flat and is set for a small weekly gain. U.S. data showed a surge in ADP private payrolls but a moderate increase in new claims for unemployment benefits. These factors contribute to the dynamics influencing GBP/USD.
GOLD
- Gold prices remained range-bound on Friday, facing downward pressure due to concerns about rising U.S. interest rates. Market participants awaited the release of nonfarm payrolls data for further guidance.
- The ADP data release indicated a resilient labor market that has withstood an aggressive tightening cycle over the past year. This suggests that the Federal Reserve has room to continue raising interest rates in order to address elevated prices.
- Following Thursday's reading, markets began pricing in a higher likelihood of additional interest rate hikes by the Federal Reserve this year. Fed Fund futures prices indicated an approximately 92% probability of a 25-basis point hike by the end of July.
- Rising interest rates have a negative impact on gold prices as they increase the opportunity cost of holding it. Investors tend to favor positions in the U.S. dollar and U.S. debt instead.
Closing statement: Gold prices stabilized after a decline driven by the Federal Reserve's meeting minutes, which indicated strong support for additional rate hikes. Market expectations for a rate increase in July heightened, adversely affecting the outlook for gold. Rising interest rates create a challenging environment for non-yielding assets like gold due to increased opportunity costs associated with holding such assets.
CRUDE OIL
- Crude oil prices climbed on Friday, continuing their upward trajectory for the second consecutive week. Resilient demand contributed to a larger-than-expected decline in U.S. oil inventories, countering concerns over potential increases in U.S. interest rates.
- The Energy Information Administration reported that U.S. crude stocks fell more than anticipated due to robust refining demand, while gasoline inventories recorded a significant draw following increased driving activity. These factors supported the positive sentiment in the oil market.
- Both Saudi Arabia and Russia, major oil exporters, announced additional production cuts for August. The combined reduction now amounts to over five million barrels per day, equivalent to 5% of global oil output. This commitment to supply cuts added further support to oil prices.
- OPEC is expected to maintain an optimistic outlook on oil demand growth for the upcoming year when it releases its first outlook later this month. While projecting a slowdown from the current year, OPEC anticipates an above-average increase in demand. Sources close to OPEC revealed these insights.
| SMA (20) | Slightly Rising |
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| RSI (14) | Slightly Rising |
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| MACD (12, 26, 9) | Rising |
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Closing statement: Crude oil prices continued to rise, extending their positive momentum for the second consecutive week, driven by resilient demand. The larger-than-expected decline in U.S. oil inventories, coupled with output cuts announced by Saudi Arabia and Russia, supported the upward trend. OPEC is anticipated to present an optimistic outlook on oil demand growth in its upcoming outlook, signalling a slowdown from the current year but still projecting an above-average increase.
DAX
- European stock markets experienced further declines on Friday, extending the sharp losses from the previous session. Concerns over an economic slowdown and the anticipation of rising interest rates weighed on market sentiment ahead of the highly anticipated U.S. payrolls release.
- German industrial production recorded a 0.2% decline in May, indicating ongoing challenges in the country's industrial sector despite a slight increase in the previous month. These figures reflect the continued struggle faced by the German economy.
- Following the closing session on Thursday, Germany's stock market saw losses, primarily driven by declines in the Financial Services, Technology, and Consumer & Cyclical sectors.
- The DAX index hit a new three-month low, declining by 2.57%, while the MDAX index fell by 2.64%, and the TecDAX index declined by 2.24%.
| SMA (20) | Slightly Falling | | |
| RSI (14) | Falling | |
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| MACD (12, 26, 9) | Falling | |
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Closing statement: European stock markets, including the DAX index, faced additional declines amid concerns of an economic slowdown and the anticipation of rising interest rates. German industrial production displayed a decline in May, indicating ongoing challenges in the industrial sector. Losses in various sectors contributed to the overall decline in the German stock market.