Markets rebound after yesterday's volatility

Inflation and Economic Indicators

The US Consumer Price Index (CPI) experienced a 0.1% month-over-month decline in June, hitting its lowest point in over three years. In contrast, the core CPI, which excludes food and energy prices, saw a 3.3% year-over-year increase, slightly down from May's 3.4% rise. Additionally, the core CPI increased by 0.1% month-over-month, below the anticipated 0.2%.

Market in correction troday

• Price Movement: The price of gold dipped, reversing some of Thursday's gains that were inspired by softer US CPI data.
• US Bond Yields: An increase in US bond yields bolstered USD demand, putting pressure on gold prices.
• Fed Rate Cut Bets: Expectations for a Federal Reserve rate cut in September are likely to support gold, limiting potential losses.

On Thursday, gold prices surged to the $2,424-2,425 region, their highest since May 22, driven by another mild US inflation report that fueled speculation of a September rate cut by the Federal Reserve. However, the rally lacked momentum during today's session as the USD rebounded from a near three-month low, supported by rising US Treasury bond yields. The limited return of bulls to risker assets also contributed to selling pressure on gold during the European session on Friday.

While gold appears to have ended a three-day winning streak, a significant downturn seems unlikely due to expectations of an imminent Fed rate cut. Additionally, political uncertainties in the US and Europe, alongside global economic slowdown concerns, are expected to provide tailwinds for gold, warranting caution for bearish traders. Market participants are now focusing on the upcoming US Producer Price Index (PPI) and the University of Michigan Consumer Sentiment survey for further direction.

Oil Market

• WTI Price Support: West Texas Intermediate (WTI) oil prices found support as easing inflation data bolstered expectations for a Fed rate cut in September.

WTI oil prices were around $81.80 per barrel during Asian trading hours on Friday. Lower borrowing costs support the US economy, the world's largest oil consumer, thereby boosting crude oil demand. Recent API reports indicated a 1.9-million-barrel drop in US oil inventories (compared to an expected 0.2-million-barrel decline), with gasoline inventories down 2.95 million barrels and distillate inventories up by 2.34 million barrels.

Earnings Season

The earnings season for the second quarter of 2024 kicks off this week, with major US banks such as JPMorgan, Wells Fargo, and Citi set to report their results on Friday.