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Markets await central banks amid key data releases
The expected Fed rate cut in September keeps the US Dollar defensive, benefiting gold but limiting its upside until clearer Fed signals.
The Japanese Yen (JPY) declining against the US Dollar for the second consecutive day
Energy commodities pulling back
JOLTS, consumer confidence, and API oil inventories reports to be released today
Central Banks and Currencies
The Japanese Yen (JPY) continues its decline against the US Dollar for the second consecutive day. Traders are exercising caution ahead of the Bank of Japan’s policy meeting on Wednesday, where a potential rate hike is anticipated. Speculation suggests the BoJ may raise rates by ten basis points to 0.1% and announce plans to taper bond purchases.
US Dollar (USD) may encounter headwinds as the US Federal Reserve is expected to maintain current rates on Wednesday. However, traders are anticipating a Fed rate cut in September, with a 100% probability of at least a quarter percentage point cut. Signs of cooling inflation and easing labor market conditions in the United States have fueled expectations of three rate cuts by the Fed this year.
Commodities
Gold
Gold prices saw some dip-buying during the Asian session on Tuesday but remained within the previous day's broader trading range and below the $2,400 mark. The weaker tone in equity markets and geopolitical risks from conflicts in the Middle East are key factors supporting the safe-haven commodity. Furthermore, the growing expectation that the Federal Reserve will begin its rate-cutting cycle in September has kept US Dollar bulls on the defensive, benefiting the non-yielding yellow metal.
However, the upside for gold prices is likely to be limited as traders may prefer to wait for clearer signals about the Fed's policy path before committing to a firm near-term direction. The focus will remain on the outcome of the two-day Federal Open Market Committee meeting on Wednesday. Additionally, important US macro data, including the Nonfarm Payrolls report on Friday, will influence USD price dynamics and gold prices. It is prudent to wait for follow-through buying before confirming that the recent pullback from the all-time peak has ended.
Energy
Energy commodities are experiencing a pullback:
- Oil: Down 0.5%
- US Natural Gas: Down 0.2%
European Market
Spanish Economic Data
The Spanish GDP report for Q2 2024 was released today. The data was a positive surprise, with GDP growing faster than expected and maintaining the QoQ growth pace from Q1 2024. The CPI report surprised to the downside, with headline CPI inflation slowing more than expected.
This release triggered a minor pullback in the EUR market, with EUR/USD dropping less than 0.1% in the first few minutes after the release.
Upcoming European Economic Data
- 9:00 am BST - Italy: GDP report for Q2 2024. Expected: 0.2% QoQ. Previous: 0.3% QoQ
- 9:00 am BST - Germany: GDP report for Q2 2024. Expected: 0.1% QoQ. Previous: 0.2% QoQ
- 10:00 am BST - Euro Area: GDP report for Q2 2024. Expected: 0.2% QoQ. Previous: 0.3% QoQ
- 1:00 pm BST - Germany: Flash CPI inflation for July.
- Monthly. Expected: 0.2% MoM. Previous: 0.1% MoM
- Annual. Expected: 2.2% YoY. Previous: 2.2% YoY
US Market
Key Economic Reports
- 3:00 pm BST - US: JOLTS report for June. Expected: 8.02 million. Previous: 8.14 million
- 3:00 pm BST - US: Conference Board consumer confidence index for July. Expected: 99.8. Previous: 100.4
- 9:40 pm BST - US: API report on US oil inventories
