Japan's market rebounds sharply; Gold stays range-bound

Banks and Economic indicators

Yesterday's trading session saw significant declines. Yet, despite the initial sell-off, the market's downturn softened following a higher-than-expected ISM services report from the US. Federal Reserve member Daly noted stable labor market indicators and readiness to act on new data, while Fed's Austan Goolsbee highlighted the restrictive nature of current policies and the need for a cautious approach based on comprehensive data analysis. Better-than-expected ISM services data, with key metrics like Prices Paid and Employment exceeding forecasts, strengthened the dollar and curbed the euro's rally. Goldman Sachs revised its interest rate cut forecasts, now predicting 25 basis point cuts in September, November, and December, reflecting a higher recession risk estimate at 25%.

Reserve Bank of Australia

The AUD led gains in the broader FX market following the Reserve Bank of Australia's decision to keep interest rates unchanged at 4.35%. The RBA reiterated concerns about persistent inflation and maintained that all options are on the table for future policy decisions. This stance bolstered the Australian dollar's performance amid a cautious yet optimistic outlook.

Currencies

USD/JPY

Following Monday's sharp decline, Japan's market saw a dramatic recovery today, exemplifying a complete reversal. Concurrently, the yen weakened, causing the USD/JPY exchange rate to climb to approximately 146.50, before it started to fall again later in the session.

EUR/USD

The EUR/USD pair struggled to break above the 1.10 mark, trading at 1.095. The better-than-expected US ISM services report strengthened the dollar, limiting the euro's rally.

Commodities

Gold

Gold prices have been consolidating within a range, influenced by a mix of opposing forces. The risk-on sentiment from a relief rally in equity markets acted as a headwind for the safe-haven metal. Meanwhile, rebounding US Treasury bond yields supported the US dollar, further limiting gold's upside. Despite this, gold remains supported by expectations of larger interest rate cuts by the Federal Reserve due to softer US economic data and persistent geopolitical risks in the Middle East.

Oil

Oil market showed minimal price movement, with WTI crude oil trading slightly higher today. The initial decline in oil prices, driven by recession fears and China's economic challenges, was cushioned by rising geopolitical tensions in the Middle East. As WTI attracted some buyers amid these tensions, the market found some stability.