Market stability prevails amidst expectations of US interest rate pause

The markets are characterized by stability as anticipation grows over a potential pause in interest rate increases in the United States.

By Raed Alkhedr | @raedalkhedr | 11 August 2023

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  • The US dollar has experienced a marginal downturn

  • The British pound has gained ground following robust economic data

  • The International Energy Agency has revised down its global oil demand growth projection for 2024

  • US producer price data has surpassed market expectations

Amid the decline in the US dollar index, gold has ascended

The US dollar began the latest session with a slight dip against the majority of major currencies and commodities, hovering around the 102.74 mark.

In his initial commentary on the recently released inflation data, US President Joe Biden noted that the Consumer Price Index report for July underscores the resilience of the US economy. He further added that low-wage workers have experienced sustained progress, with real wages surpassing levels seen prior to the pandemic.

Mary Daly, a Federal Reserve member and President of the Federal Reserve Bank of San Francisco, conveyed that the central bank of the US still has more ground to cover, indicating that decisions regarding interest rate increases have not yet been finalized.

Shifting focus, gold has observed a significant surge during today's trading, with its value nearing $1914 per ounce.

Following growth indicators, the British pound has advanced

The British pound has rebounded from its week-long low against the US dollar, propelled by robust economic data from the United Kingdom. These figures reinforce the likelihood of the Bank of England continuing its trajectory of interest rate hikes throughout the remainder of the year.

According to the data unveiled today, the UK's Gross Domestic Product expanded by approximately 0.2% in the second quarter of this year, in contrast to the 0.1% growth recorded in the previous quarter. On an annual basis, the UK economy registered a 0.4% growth, up from the preceding reading of 0.2%.

Simultaneously, the data indicates that industrial production in Britain surged by 1.8% in June compared to the previous month, surpassing market forecasts of a 0.2% increase. The previous reading indicated a contraction of 0.6% in May.

These findings underscore the robust resilience of the UK economy, even amidst the tight monetary policies of the Bank of England and the highest interest rates in 15 years, set at 5.25%.

In terms of trading, the British pound has exhibited an increase against the US dollar in today's trading session, with the currency pair trading close to 1.2688 dollars.

For the first time in five months, US producer price data displays a positive trajectory

Data released by the US Bureau of Labor Statistics reveals a growth of 0.3% in the Producer Price Index for July, in contrast to the 0.1% reading seen in June. On an annual basis, the index expanded by 0.8%, surpassing the earlier reading of 0.2%.

Meanwhile, the core producer price index, which excludes food and energy components, remained stable at the same level as the previous reading, namely 2.4%. On a monthly basis, the core index grew by 0.3%, a positive shift from the 0.1% contraction witnessed in the prior reading.