Market sentiment dampens ahead of FOMC minutes

US-China tensions add to concerns, Oil prices react to supply cuts

By Nadia Elbilassy | @Nadia Elbilassy | 5 July 2023

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  • Aussie dollar ends four-day streak of gains, Euro remains steady, and oil prices remain stable

  • US dollar holds steady while yen weakens on intervention concerns.

  • Wall Street futures decline due to anticipation of Fed minutes, US-China tensions, and disappointing economic data from Beijing.

What’s going on markets!

- Wall Street futures decline

Investor sentiment was dampened on Wednesday as Wall Street futures declined, driven by a combination of factors including anticipation of the Federal Reserve's June meeting minutes, which were expected to provide insights into the central bank's monetary policy direction.

Furthermore, tensions between the US and China, along with disappointing economic data from Beijing, contributed to the overall negative sentiment.

- The currency market

In the currency market, the U.S. dollar held steady ahead of the minutes near 103.15. Investors are currently factoring in an 86% probability of the Federal Reserve increasing rates by a quarter-point in July. Additionally, there is a nearly 20% likelihood of another 25-basis point increase in September. While investors will closely examine the minutes of the Federal Reserve's June meeting for any insights into the central bank's thoughts, the monthly employment report set to be released on Friday is expected to carry more significant influence and attention from market participants.

A possible intervention by Tokyo in foreign exchange markets, weighed on the yen. Whilst the USD/JPY pair hovered near 144.49.

The Aussie ended its four day streak of gains, to drop near $0.6663 and the Euro was pinned near 1.089 after a slew of economic data capped gains.

- Oil prices

Brent crude oil prices remained relatively stable with little change. The announcement of supply cuts by major crude exporters Saudi Arabia and Russia was offset by concerns surrounding the global economy.

WTI also held above $70.