EURUSD
- Trading Dynamics: EUR/USD is trading near 1.0700, undermined by persistent US Dollar strength amidst a cautious market mood.
- Fed Rate Reduction Debate: Market participants continue to debate whether the Federal Reserve will implement one or two rate reductions this year, despite the Fed's forecast for just one cut likely in December.
- Fed's Policy Stance: Fed Governor Michelle Bowman emphasized that holding the policy rate "for some time" will likely be sufficient to control inflation, but she remains open to increasing rates if necessary.
- ECB Rate Cut Impact: The recent rate cut by the European Central Bank (ECB), contrasting with the Fed's decision to maintain rates, has widened the policy gap between the two central banks, potentially leading to further EUR/USD weakness in the short term.
- ECB Policy Outlook: ECB policymaker Olli Rehn indicated that market expectations for the ECB to reduce interest rates twice more this year, potentially reaching as low as 2.25% in 2025, are reasonable.
| SMA (20) | Falling |
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| RSI (14) | Slightly Falling |
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| MACD (12, 26, 9) | Falling |
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Closing statement: EUR/USD remains under pressure near 1.0700, primarily due to the persistent strength of the US Dollar and the widening policy gap between the Federal Reserve and the European Central Bank. The ongoing debate around Fed rate cuts and the ECB's recent rate reduction have contributed to the pair's bearish outlook. Market participants should closely monitor future communications from both central banks, as well as key economic indicators, to gauge potential movements in the EUR/USD pair.
GBPUSD
- Trading Dynamics: GBP/USD holds below 1.2700, trading sideways for the second straight day on Wednesday, influenced by divergent policy outlooks between the Federal Reserve (Fed) and the Bank of England (BoE), as well as pre-UK election anxiety.
- Thin Data Session: The Tuesday market session was notably thin on data, with no significant releases from the UK and mid-tier data from the US.
- Richmond Fed Manufacturing Index: The Richmond Fed’s Manufacturing Index declined sharply to -10 in June, down from 0 and missing the forecast increase to 2.
- CB Consumer Confidence Survey: The CB Consumer Confidence survey index eased back to 100.4 from the previous 102.0, slightly better than the forecast of 100.0.
- Upcoming Key Data: Noteworthy data releases this week include the Bank of England’s latest Financial Stability Report on Thursday, followed by US Durable Goods Orders and US Gross Domestic Product (GDP) revisions for the first quarter.
| SMA (20) | Slightly Falling |
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| RSI (14) | Slightly Falling |
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| MACD (12, 26, 9) | Slightly Falling |
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Closing statement: GBP/USD remains constrained below 1.2700, trading within a familiar range due to the divergent policy outlooks between the Fed and the BoE, as well as pre-election concerns in the UK. With a lack of significant data on Tuesday, market focus will shift to key releases later in the week, including the BoE’s Financial Stability Report and crucial US economic indicators. These forthcoming events are likely to provide further direction for the pair.
GOLD
- Gold Price Decline: Gold price continues its decline from Tuesday, hitting a fresh weekly low near $2,310 in Asian trading on Wednesday.
- Fed Governor's Remarks: In her prepared remarks for a speech in London, Fed Governor Michelle Bowman indicated that it will eventually become appropriate to lower the federal funds rate gradually if data shows inflation moving towards the 2% goal.
- Hawkish Fed Commentary: Governor Lisa Cook mentioned that while inflation has slowed and labor market tightness has eased, the timing of a rate cut remains uncertain.
- Market Expectations: The hawkish commentary from the Fed has negatively impacted gold prices. The markets are pricing in about a 68% chance of a Fed rate cut in September, according to the CME FedWatch Tool.
- Upcoming Data: Gold traders are awaiting mid-tier US housing data due on Wednesday, with sentiment around Fed rate-cut expectations likely to continue driving gold price action.
Closing statement: Gold prices are under pressure, hitting fresh weekly lows near $2,310 amid hawkish commentary from Fed officials. Despite slowing inflation and eased labour market tightness, the timing of a rate cut remains uncertain, keeping market expectations in flux. Traders are closely watching upcoming US housing data for further cues, as sentiment around Fed rate-cut expectations continues to influence gold price movements.
CRUDE OIL
- Price Movement: West Texas Intermediate (WTI) US Crude Oil eased back on Tuesday, dropping over a dollar per barrel from $81.50 to test below $80.50.
- API Report: The American Petroleum Institute (API) reported a week-on-week buildup of Weekly Crude Oil Stocks for the week ending June 21, showing a 900K barrel buildup compared to the expected drawdown of 3 million barrels.
- Geopolitical Concerns: Crude Oil prices have been supported by fears that the Israel-Palestinian Hamas conflict might spread to neighboring countries, although no actual disruptions in Crude Oil production have been observed.
- OPEC+ Production: The Organization of the Petroleum Exporting Countries (OPEC) and its allies, OPEC+, are set to begin phasing out voluntary production cuts intended to bolster global Crude Oil prices.
- Supply Increase: OPEC+’s gradual phasing out of production caps could add an additional 2.2 million barrels per day (bpd) to global Crude Oil supplies as member states grow weary of propping up global energy prices at the expense of their government budgets, which rely on Crude Oil sales.
| SMA (20) | Slightly Rising |
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| RSI (14) | Rising |
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| MACD (12, 26, 9) | Rising |
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Closing statement: WTI Crude Oil prices fell below $80.50 on Tuesday amid a surprising buildup in US Crude Oil stocks reported by the API and the anticipated end of voluntary production cuts by OPEC+. Despite geopolitical tensions involving Israel and Palestine, no disruptions in Crude Oil production have occurred. The market is also preparing for a potential increase in supply as OPEC+ phases out production caps, potentially adding 2.2 million bpd to global supplies, which could further pressure prices.
DAX
- French Election Debates: Profit warnings and concerns about the French elections, scheduled for June 30 and July 7, have impacted the DAX. Polls indicate the risk of a hard-left government that plans to increase spending and taxation.
- Airbus Profit Warning: On Tuesday, Airbus (AIR) issued a profit warning and lowered its forecast for plane deliveries, affecting the aerospace and defense sectors.
- Lack of Economic Indicators: There were no economic indicators from the Euro area yesterday, leaving investors focused on the upcoming French elections and issues in the aircraft manufacturing sector.
- German Consumer Climate: The German GfK Consumer Climate Indicator for July unexpectedly fell from -20.9 to -21.8, as announced this morning.
- ECB Speeches: Monitoring ECB speeches is crucial, as a potential green light for a Q3 2024 ECB rate cut could increase buyer demand for the DAX.
| SMA (20) | Slightly Falling |
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| RSI (14) | Slightly Rising |
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| MACD (12, 26, 9) | Falling |
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Closing statement: The DAX faces pressure from profit warnings and uncertainties surrounding the upcoming French elections, which could result in significant policy changes. Airbus' lowered forecast for plane deliveries added to the sector's woes. The unexpected drop in the German GfK Consumer Climate Indicator further underscores the cautious market sentiment. Investors should keep an eye on ECB speeches, as hints of a Q3 2024 rate cut could provide some support for the DAX amidst these challenges.