Yesterday, the financial markets experienced significant fluctuations across various asset classes. Key economic indicators from the United States and Europe influenced market sentiment, resulting in notable movements in bond yields, precious metals, and equities. The US 10-year Treasury yield declined amidst expectations of rate cuts, while gold and silver prices faced pressure due to stabilizing US dollar and industrial demand concerns. Meanwhile, the energy market grappled with rising crude inventories, and the FX market saw the euro and pound weaken as investors anticipated central bank rate decisions. This report will delve into these developments and provide insights into potential market movements today.
Economic Events:
Today’s focus will be on several critical economic events. In the US, investors await the ADP employment change and the non-manufacturing PMI figures, which will provide further clues on the labor market’s health and economic activity. In Europe, all eyes are on the European Central Bank’s interest rate decision, with markets widely expecting a 25 basis point cut. The Bank of Canada will also announce its rate decision, which could set the tone for global monetary policy trends. Additionally, the Australian GDP data released today will influence the Australian dollar’s movement, reflecting the country’s economic resilience.
BOND:
The yield on the US 10-year Treasury note dropped to 4.4%, a two-week low, as evidence mounts that the US economy is increasingly vulnerable to higher interest rates. The ISM manufacturing index revealed a sharper-than-expected contraction in May, adding pressure on the sector. The survey’s price gauge also rose less than anticipated, suggesting an economic environment conducive to lower interest rates. Consequently, nearly half of the market now expects more than one rate cut from the Federal Reserve this year, a shift from the earlier consensus of a single cut. Upcoming labor market data will further influence the Fed’s policy direction.
Gold (XAUUSD):
Gold prices edged lower to $2,330 per ounce as the US dollar stabilized ahead of the crucial US jobs report due later this week. Investors are closely watching the nonfarm payrolls data for hints on the Fed’s rate-cut timeline, especially after recent economic releases fueled speculation about potential rate reductions this year. Currently, traders are pricing in a 65% chance of a rate cut in September. Meanwhile, global central bank gold purchases rose to 33 metric tons in April, indicating strong demand despite high prices. The Bank of Canada is expected to cut rates today, with the European Central Bank anticipated to follow suit on Thursday.
Silver:
Silver prices fell below $30 per ounce, retreating from the 11-year high of $32 reached in late May. This decline reflects ongoing assessments of central bank rate outlooks and industrial demand dynamics, particularly in the solar industry, a significant consumer of silver. The US recently imposed a 50% tariff on Chinese solar cell imports, impacting demand for Chinese-manufactured panels. However, robust demand in domestic Chinese markets and expectations of global rate cuts have mitigated the price drop. The ECB and BoC are set to cut rates in their upcoming meetings, with the Fed and other major central banks expected to follow in the third quarter.
S&P500:
US stock futures edged higher, lifted by strong earnings from major tech companies. Yesterday, the Dow, S&P 500, and Nasdaq saw modest gains, driven by sectors like real estate, consumer staples, and technology. However, material and energy stocks lagged due to weak commodity prices. Investors are now focused on today’s ADP employment numbers and services activity data.
Overall, the market is poised for significant movements today as investors digest crucial economic data and central bank decisions. The interplay between economic indicators and central bank policies will continue to shape the financial landscape in the near term.
Foreign Exchange Market (FOREX):
The euro fell to $1.087 from a 10-week high as investors anticipate an ECB rate cut of 25 basis points on Thursday in response to easing inflation. The British pound dropped to $1.27 as investors took profits after a strong May performance. This week’s focus is on the ECB’s decision and US employment data, with UK events playing a minor role. The Australian dollar remained steady above $0.665, buoyed by less disappointing domestic economic data, with a minimal chance of an RBA rate cut this year.
Bitcoin (BTC):
Bitcoin (BTC) has been relatively stagnant over the past three weeks, showing no clear direction for a significant move up or down. However, the daily BTC/USD chart indicates a bullish trend, with all three simple moving averages aligned in a positive setup. This suggests potential for upward momentum, further supported by a recent pattern of higher lows and higher highs since early May.
If Bitcoin manages to break and sustain above $70,000, it could quickly test the $72,000 level, putting the all-time high (ATH) of $73,778 within reach. The medium-to-long-term outlook for BTC remains favorable, especially as demand from various global spot BTC exchange-traded funds (ETFs) surpasses the new BTC supply post-halving.
US Crude Oil WTI :
WTI crude futures held steady at around $73 per barrel, marking a four-month low after five consecutive sessions of declines. The market is weighed down by signs of rising global supplies amidst an uncertain demand outlook. US crude inventories unexpectedly increased by 4.052 million barrels last week, defying expectations of a 1.9 million barrel draw. OPEC+ agreed to extend most supply cuts into 2025, with some voluntary cuts from member countries expected to be gradually reversed starting in October. By June 2025, a total of 1.8 million barrels per day is expected to return to the market.
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