EURUSD
- Tight Trading Range: The EUR/USD is trading in a narrow range above 1.1000 during Thursday's European session. Investors are adopting a cautious approach as the market digests recent developments and anticipates upcoming decisions from key central banks.
- US CPI Impact: The US Consumer Price Index (CPI) report, released earlier this week, signalled a shift in sentiment. The data dampened expectations of a 50-basis point interest rate cut by the Federal Reserve (Fed) at its meeting next week. This has added uncertainty to market participants' outlooks, making risk aversion more prominent.
- ECB Rate Decision: Attention has now shifted to the European Central Bank (ECB), which is expected to announce its monetary policy decision on Thursday. Markets widely anticipate a 25-basis point rate cut in all three of the ECB's main interest rates. This comes amid signs of cooling inflation in the Eurozone and further economic data suggesting a slowdown.
- German CPI and Eurozone Inflation: Investors' expectations of an ECB rate cut were strengthened by the German Consumer Price Index (CPI) data, which fell to its lowest level in over three years in August, touching the ECB’s 2% inflation target. This reinforces the view that inflationary pressures are easing, providing more room for monetary policy adjustments.
- US PPI Data: The US Producer Price Index (PPI) report, set to be released later Thursday, could provide further direction for the EUR/USD. This data is likely to influence the Fed's policy outlook and create potential trading opportunities during the North American session as market participants reassess the balance between the Fed and ECB's next moves.
| SMA (20) | 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 will likely continue to trade within a tight range until more clarity is gained from the ECB rate decision and US PPI data. The ECB's anticipated 25-bps rate cut, coupled with signs of inflation cooling in Germany, suggests the Euro could see some support in the near term, though sentiment remains cautious. Conversely, if US PPI data surprises on the upside, it could shift the Fed's rate expectations, weighing on the EUR/USD pair. Traders will be looking for key catalysts from both central bank decisions to guide future positioning.
GBPUSD
- Current Trading: The GBP/USD pair is under renewed selling pressure, currently trading around 1.3045 as markets react to the latest US inflation data. The pair's decline reflects intensifying bearish sentiment as traders digest economic reports and future rate hike expectations from both the US Federal Reserve and the Bank of England (BoE).
- Technical Indicators: Key technical indicators are showing bearish signals. The Relative Strength Index (RSI) is pointing downward, hovering near 50, while the Moving Average Convergence Divergence (MACD) remains in negative territory, signalling further downside momentum in the short term.
- US Inflation Data Reaction: While headline US inflation has declined, core inflation (which excludes food and energy) held steady at 3.2% year-on-year for August, in line with expectations. Monthly figures showed that both headline CPI and core CPI rose by 0.2% and 0.3%, respectively, slightly exceeding market forecasts. This has fuelled expectations that the Federal Reserve may remain cautious about cutting rates too aggressively, providing support for the US Dollar.
- UK Economic Concerns: Adding to the pressure on the British Pound, the release of soft Gross Domestic Product (GDP) figures during the European session further weakened sentiment around the UK economy. This economic softness has raised concerns about the broader health of the UK's recovery and dampened confidence in GBP/USD.
- Outlook for the BoE: Despite the current weakness, leading economic indicators point to a potential rebound in UK economic activity. As a result, it is unlikely that the Bank of England (BoE) will aggressively cut interest rates beyond the 50 basis points already anticipated by year-end. This expectation could provide some support for the GBP, particularly if the BoE takes a more cautious approach to rate cuts compared to its global peers.
| 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: The GBP/USD pair is likely to remain under pressure in the near term, particularly as the US Dollar strengthens on firmer inflation data and GBP sentiment is weighed down by soft UK GDP numbers. However, the possibility of the Bank of England limiting its rate cuts could offer some support to the Pound moving forward. Traders will closely monitor upcoming economic data, especially UK GDP releases and further inflation reports from both economies, to gauge the next moves from central banks.
GOLD
- Recovery Attempt Above $2,500: Gold price is attempting a minor recovery early on Thursday, holding steady above the $2,500 mark. Buyers remain cautiously optimistic, betting on potential gains despite mixed signals from recent economic data and market sentiment.
- US CPI Impact on Fed Expectations: The release of the US Consumer Price Index (CPI) inflation data on Wednesday tempered expectations for an aggressive Federal Reserve (Fed) interest rate cut next week. The data, which showed inflation not slowing as much as some had hoped, reduced the odds of a large rate cut, limiting gold's immediate upside.
- Fed Rate Cut: Following the CPI release, investors trimmed their expectations for a 50-basis point Fed rate cut. According to the CME FedWatch Tool, the chances of a 50-bps cut are now at 29%, while a 25-bps cut has a 71% probability. These recalibrated expectations are putting some pressure on gold, as smaller cuts typically strengthen the US Dollar, which in turn weighs on gold prices.
- Support from Precious and Industrial Metals: Gold could find some support from gains in other precious metals and industrial metals like Palladium and Nickel. The potential for export curbs from Russia on key metals is a growing concern and could drive prices higher across the board, including gold, as investors look for safe-haven assets amidst supply disruptions. Upcoming US Economic Data: Traders are now eyeing a fresh batch of top-tier US economic data due later Thursday. These reports could provide additional insights into the Fed's policy stance and the broader US economy. The data will likely influence the US Dollar, and any further weakness in the USD could offer tailwinds to the gold price.
Closing statement: The gold price remains sensitive to ongoing developments in US monetary policy, particularly with the Fed meeting on the horizon. As expectations of a large interest rate cut fade, gold could face limited upside in the short term, but factors such as gains in other metals and potential geopolitical risks could still offer support. Traders will closely watch the next wave of US economic data for more clarity on the Fed's upcoming decisions, which could drive further volatility in both the US Dollar and gold prices.
CRUDE OIL
- Steady Prices Around $68.00: West Texas Intermediate (WTI) oil prices remain steady, trading near $68.00 per barrel during Thursday's Asian session. Despite various market forces, oil has been hovering around this level, reflecting a balance between supply concerns and weakening demand signals.
- Hurricane Impact: Although Hurricane Francine has disrupted US Oil production, concerns about weakening global demand, particularly from key markets, have tempered the impact. The United States remains the world’s largest crude producer, and supply disruptions typically have significant effects on oil prices. However, these concerns have been overshadowed by faltering demand, particularly from economies like China.
- China's Transition to Electric Vehicles: One of the key factors pressuring oil demand is the growing adoption of electric vehicles (EVs), especially in China, a critical market for global oil consumption. As EV uptake increases, it is reducing the need for crude oil in the transportation sector, further weakening demand and putting downward pressure on prices.
- Rising US Oil Stockpiles: The latest data from the Energy Information Administration (EIA) showed that US Oil stockpiles increased across the board last week. This rise was driven by a combination of increased crude imports and declining exports. The EIA also noted that gasoline demand fell to its lowest level since May, reinforcing the perception of weakening demand in the US.
- Anticipation for IEA Report: Oil traders are eagerly awaiting the release of the International Energy Agency’s (IEA) monthly market report later this week. The report is expected to provide further insights into the global demand outlook, which could shape oil price trends in the near term. Traders are particularly focused on any signs of a deteriorating demand outlook amidst global economic uncertainty.
| SMA (20) | Falling |
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| RSI (14) | Falling |
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| MACD (12, 26, 9) | Falling |
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Closing statement: The WTI crude market is caught in a balancing act between supply disruptions caused by Hurricane Francine and the growing concerns about weakening demand, particularly in major economies like China. While the rise in US stockpiles and falling gasoline demand reflect softening consumption, the upcoming IEA report could provide clearer direction on the global demand situation. If the report signals further demand weakness, WTI prices could face additional downward pressure in the near term, with broader market conditions playing a pivotal role in shaping price movements. .
DAX
- Market Movers: Commerzbank led the charge on the DAX, surging by 16.59% after news broke that UniCredit had bought a 9% stake, sparking speculation of a potential takeover attempt. Additionally, auto stocks played a significant role in boosting the index, with BMW rallying by 3.04% as these stocks recovered losses from the previous day. Overall, this provided a significant uplift to the German index.
- US CPI Report: On Wednesday, the US Consumer Price Index (CPI) report significantly impacted global investor sentiment, including in European markets. While the headline inflation rate for August softened to 2.5%, the core inflation rate remained stable at 3.2%, which is still above the Federal Reserve’s 2% target. This development reduced investor bets on a 50-basis point rate cut by the Fed in September, dampening hopes for aggressive monetary easing.
- German Wholesale Prices: In August 2024, the selling prices in German wholesale trade were 1.1% lower than in the same month the previous year. This decline in wholesale prices indicates a cooling in inflationary pressures within Germany, a key data point for the European Central Bank (ECB) as it navigates its monetary policy decisions.
- ECB Rate Decision: Later Thursday, the focus will shift to the ECB’s interest rate decision and accompanying press conference. The market is widely expecting the ECB to announce a 25-basis points rate cut, which would bring the policy rate down to 4%. This decision will be crucial for market sentiment, as traders await further signals on the ECB’s approach to balancing inflation and economic growth in the Eurozone.
- US Data: Also on Thursday, US initial jobless claims and producer price index (PPI) data will be released, which could provide further insight into the direction of Federal Reserve policy. Investors will be closely watching these figures to gauge the likelihood of future rate cuts by the Fed and how they might impact global market sentiment, including the DAX.
| SMA (20) | Slightly 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: The DAX has benefited from strong performances in banking and auto stocks, while broader market sentiment remains tethered to the direction of central bank policies on both sides of the Atlantic. With the ECB’s anticipated rate cut and US economic data in focus, investors will be watching closely for clues that could shape the next steps in the Fed’s monetary policy, which will likely influence the DAX’s performance in the near term.