In today’s report, we review the significant movements in the financial markets from the previous day and provide an outlook for today. Key events include the US 10-Year Treasury Note yield remaining steady, declines in gold and silver prices amidst economic uncertainties, a slight dip in WTI crude prices following a previous surge, and mixed performances in the US stock market with notable movements in tech and pharmaceutical sectors. We also observe significant fluctuations in major currencies like the euro, yen, and Australian dollar due to geopolitical developments and strong US economic data. Lastly, Bitcoin experienced a notable decline, continuing its recent downtrend.
Table of Contents
Economic Events
Tomorrow’s economic calendar is dominated by the Federal Reserve’s Federal Open Market Committee (FOMC) meeting conclusion. The committee is widely expected to maintain the current interest rates. However, the real focus will be on the Fed’s updated dot plot and the summary of economic projections, which will provide insights into the future path of interest rates. The recent mix of fundamental data has complicated the outlook for the US economy, with inflation showing signs of easing but still above the Fed’s 2% target. Additionally, the release of the May CPI data just hours before the Fed’s statement could serve as a significant market catalyst.
The Fed is likely to reiterate its stance from the May meeting, emphasizing a restrictive monetary policy until there is clear evidence that inflation is trending towards 2%. April’s year-on-year inflation showed the first decline since January, but core inflation pressures remain. The market has adjusted its expectations, now predicting a potential rate cut in December, following last Friday’s strong non-farm payrolls report.
US10Y
On Tuesday, June 11, the yield on the US 10-Year Treasury Note was 4.45%. This yield provides a critical indicator of investor sentiment and future economic expectations. Historically, the yield reached an all-time high of 15.82% in September 1981.
Stock Market
US stock futures were slightly down on Tuesday as the Federal Reserve commenced its two-day monetary policy meeting. On Monday, the S&P 500 and Nasdaq Composite recorded modest gains, with the Dow also rising. Notable stocks included Nvidia, benefiting from a stock split, and Eli Lilly, which saw gains after positive news about its Alzheimer’s drug. Conversely, AMD’s stock fell following a downgrade. Investors are keenly awaiting the Fed’s decision and the consumer price index report for further market direction.
Foreign Exchange Market (FOREX)
EURUSD
The euro depreciated past $1.075, hitting a one-month low amid political uncertainty in Europe following gains by far-right parties in the European Parliament elections. The strength of the US dollar, driven by strong jobs data, has also pressured the euro. The European Central Bank recently implemented its first rate cut in five years but remains cautious about further reductions.
USDJPY
The Japanese yen weakened past 157 per dollar, influenced by strong US jobs data that diminished the likelihood of Federal Reserve rate cuts. Japan’s economy contracted less than initially reported in the first quarter, and its current account surplus exceeded expectations. Investors are now focusing on the Bank of Japan’s upcoming policy decision and its strategy regarding bond purchases.
AUDUSD
The Australian dollar fell below $0.66, nearing a one-month low. Strong US jobs data and cautious sentiment ahead of the Federal Reserve’s policy decision have impacted the currency. Australia’s economy grew by 0.1% in the first quarter, missing expectations. The Reserve Bank of Australia is unlikely to ease policy this year, despite acknowledging a slowing labor market and low GDP growth.
Commodity
GOLD
Gold prices dropped to nearly $2,300 per ounce, reaching a one-month low. Investors are closely watching for US inflation data and the Federal Reserve’s upcoming policy announcement, which will provide cues on potential rate changes. Recently, markets have reduced expectations for Fed rate cuts this year, and China’s central bank paused its gold purchases in May after 18 consecutive months of buying. Additionally, political uncertainty in Europe, following gains by far-right parties, has contributed to market volatility.
Silver
Silver prices fell below $30 per ounce, significantly retreating from the 11-year high of $32 touched on May 28th. Strong US economic data, particularly the robust labor market report, has pressured precious metals. The People’s Bank of China halting its gold purchases and the US imposing tariffs on Chinese solar cells have also impacted silver prices. However, strong domestic demand in China has mitigated further declines.
WTI
WTI crude futures remained near $78 per barrel on Tuesday, supported by expectations of increased fuel demand during the summer and potential US efforts to replenish its Strategic Petroleum Reserve. Market participants are cautious ahead of the Federal Reserve’s policy decision and key US inflation data. The recent strong US jobs data has raised concerns about prolonged high interest rates, potentially affecting economic growth and energy demand.
BTC
Bitcoin traded at $67,811 on Tuesday, reflecting a 2.43% decrease from the previous session. Over the past month, Bitcoin has lost 10.37% but has gained 161.87% over the past year. Projections indicate that Bitcoin might fall to $66,294 by the end of this quarter and to $62,377 within a year.
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