AUDUSD – Australian Dollar Stays Muted as Investors Exercise Caution Ahead of Impending Fed Decision
The Australian NAB Business confidence data came at -3 index points it is lowest levels in the six months, Long run average -6 points decline, This Business declines shows Higher rates prevailing in the Australian Economy. RBA said another rate hike is possible if inflation sustains above 3% target.
AUDUSD is moving in the Box pattern and the market has reached support area of the pattern
On Tuesday, the Australian Dollar (AUD) experienced a decline against the US Dollar (USD) amidst the USD’s prevailing strength, fueled by robust US jobs data for May. The positive data has tempered expectations for multiple Federal Reserve (Fed) interest rate cuts in 2024, as indicated by the CME FedWatch Tool, which now suggests a reduced likelihood of a Fed rate cut in September by at least 25 basis points.
Despite the downward pressure on the Australian Dollar, its decline may be contained by market expectations that the Reserve Bank of Australia (RBA) will maintain higher interest rates throughout the year. RBA Governor Michele Bullock recently hinted at the central bank’s readiness to raise interest rates if the Consumer Price Index (CPI) fails to return to the target range of 1%-3%.
Meanwhile, the US Dollar (USD) has retained its strength despite two consecutive days of declining US Treasury yields. Investor sentiment has turned cautious ahead of the Federal Reserve’s policy decision and the release of key US inflation data scheduled for Wednesday. The Fed is expected to maintain interest rates within the range of 5.25%-5.50% as part of its efforts to rein in inflation toward its 2% target. Projections indicate that the US headline and core CPI figures for May are anticipated to show year-over-year increases of 3.4% and 3.5%, respectively.
In terms of market movements, Australia’s NAB Business Confidence index declined to -3 index points in May, reaching its lowest level in six months and turning negative for the first time since last November. Additionally, Business Conditions dipped to 6 index points, slightly below the long-run average. NAB Chief Economist Alan Oster highlighted caution regarding the growth outlook and inflation risks, projecting that the RBA would likely maintain interest rates for the foreseeable future.
Rabobank’s report suggested the possibility of Federal Reserve rate cuts in September and December, driven more by concerns over a deteriorating economy than progress on inflation. This assessment stems from the belief that the US economy is entering a stagflationary phase characterized by persistent inflation and an economic slowdown, potentially leading to a mild recession later in the year.
On the economic front, data from the US Bureau of Labor Statistics (BLS) revealed that May’s US Nonfarm Payrolls (NFP) increased by 272,000, surpassing April’s figure of 165,000. Additionally, wage inflation, as measured by Average Hourly Earnings, rose to 4.1% year-over-year in May, exceeding market expectations.
Meanwhile, Australia’s Trade Balance widened in May, with imports declining by 7.2% month-over-month and exports contracting by 2.5%, contributing to the overall trade surplus.
XAUUSD – Gold Price Under Pressure Amid Renewed Rate Jitters, Strong US Dollar Demand
China has decreased the Buying of Gold ounces in the May month after the 18 month straight buying in the Gold purchases makes Gold prices little down against USD. Uncertainity about EU elections in the France is also another decline for Gold prices to plunge, ahead of FED Decision tomorrow makes Gold prices to trade in Flat direction.
XAUUSD is moving in the Box pattern and the market has reached the support area of the pattern
During early European trading hours on Tuesday, the Gold price (XAU/USD) encounters renewed selling pressure, relinquishing some of the modest gains it had achieved in the previous session. This retreat comes after the price rebounded from the $2,287 region, which marked a one-month low prompted by optimistic US jobs data. Investors have been adjusting their expectations regarding a potential interest rate cut by the Federal Reserve (Fed) in September, leading to elevated US Treasury bond yields and bolstering the US Dollar (USD) to hover near multi-week highs observed on Monday. Consequently, this trend dampens demand for the precious metal.
Adding to the downward pressure, the People’s Bank of China (PBoC) significantly curtails its purchasing activities in May, discontinuing a buying streak lasting one and a half years. This move contributes to diverting capital flows away from Gold prices. However, amidst these developments, political uncertainties in Europe and geopolitical tensions act as mitigating factors, limiting deeper declines in Gold prices. Market participants are likely adopting a wait-and-see approach ahead of the release of the latest US consumer inflation figures and the Federal Open Market Committee (FOMC) decision scheduled for Wednesday. These events will offer insights into the potential timing of the Fed’s rate cuts, thereby determining the short-term trajectory for the non-yielding yellow metal.
In a broader context, the upbeat US Nonfarm Payrolls report released on Friday has fueled speculations that the Federal Reserve may maintain higher interest rates for a prolonged period, presenting a significant headwind for Gold prices. Expectations for a rate cut in September have dwindled to approximately 50% following the US jobs data, with markets now pricing in just one rate reduction of 25 basis points this year, potentially scheduled for either the November or December policy meeting. The yield on the benchmark 10-year US government bond remains above 4.45%, while the yield on the two-year US Treasury note, sensitive to interest rate changes, hovers around 5.0%, supporting the strength of the US Dollar.
The USD Index, tracking the USD against a basket of currencies, maintains its elevated position near its highest level since May 14, observed on Monday, thereby restraining upward momentum for the USD-denominated commodity. Additionally, French President Emmanuel Macron’s announcement of snap elections later this month has heightened political uncertainty in the Eurozone’s second-largest economy, potentially offering some support to XAU/USD. Traders appear cautious, awaiting the release of key US macroeconomic data, particularly the latest consumer inflation figures, and the crucial FOMC decision before committing to aggressive directional positions.
EURUSD – Lagarde: ECB Interest Rates May Hold Longer
The ECB President Lagarde said there is not steady declining of rate cuts in the upcoming meetings, there will be hold for longer time is possible, due to wage growth and inflation is increasing. I am keen to see the Corporate Profits and Labour costs how much ratio is improving or declining, Time dependent rate cuts in not helpful for ECB Goals at current scenario. The Euro Currency moved up after the hawkish speech from ECB President Lagarde.
EURUSD has broken the Ascending channel in downside
European Central Bank (ECB) President Christine Lagarde emphasized that interest rates are not guaranteed to follow a consistent path of declines. She cautioned markets that expecting rate cuts to occur within specific time frames does not align with the ECB’s objectives.
Key Highlights
Interest Rate Trajectory: Interest rates are not necessarily on a linear-declining path. There may be periods when the ECB decides to maintain current rates instead of reducing them.
Rate Holds: It is possible that the ECB will hold interest rates steady for a duration longer than a single meeting, indicating flexibility in their approach.
Guidance on Rates: Providing time-dependent guidance on interest rates is not beneficial. Lagarde suggested that such expectations might not be helpful to the ECB’s goals.
Focus Areas: Lagarde expressed a keen interest in monitoring the evolution of labor costs and corporate profits, implying these factors will significantly influence future policy decisions.
USDJPY – Suzuki Stresses Ongoing Fiscal Health Efforts in Japan
The Japanese Finance minister Shunichi Suzuki said Usage of Frozen Russian Sanctions assets is unlawful as per International law and Need more efforts on maintaining Fiscal health of Japanese Economy by BoJ and Japanese Government.
USDJPY is moving in an Ascending channel and the market has rebounded from the higher low area of the channel
Japanese Finance Minister Shunichi Suzuki emphasized on Tuesday the critical importance of persisting efforts aimed at attaining fiscal soundness. Suzuki articulated his interest in engaging in deliberations concerning sanctions against Russia during the G7 summit, underlining the necessity for the utilization of frozen Russian assets to adhere rigorously to international legal frameworks.
USDCHF – Holds Near 0.8970, Eyes US Inflation and Fed Policy
The SNB Chairman Jordan said in the recent speech, inflation set to be elevated in the coming months, So further rate cuts is not necessary if inflation not under the range of 0-2% level. So Swiss Franc is appreciated and it is supportive for Export Goods for Foreign Buyers.
USDCHF is moving in the Descending channel and the market has rebounded from the lower low area of the channel
The Swiss Franc remains resilient even as the US Dollar strengthens, propelled by traders unwinding their expectations of a Federal Reserve rate cut in the upcoming September meeting.
The dovish outlook for the Fed’s September policy meeting has significantly waned following the release of the US Nonfarm Payrolls (NFP) report for May, which indicated robust labor demand and stronger-than-anticipated wage growth. The decision by the Fed to maintain interest rates at their current levels is perceived favorably amidst indications of a robust labor market.
Conversely, the decline in expectations of a Fed rate cut has fostered a risk-averse sentiment in the market. S&P 500 futures have experienced some losses during the early London session. Additionally, 10-year US Treasury yields continue to rise, reaching 4.45%.
Looking ahead, investors will closely monitor the release of the US Consumer Price Index (CPI) data for May and the Fed’s interest rate decision, both scheduled for Wednesday. Projections suggest that annual core inflation, excluding volatile food and energy prices, may have moderated to 3.5% from the previous release of 3.6%, while headline figures are anticipated to maintain steady growth at 3.4%.
The Fed is anticipated to maintain its current stance for the seventh consecutive time. Market participants will pay close attention to the Fed’s guidance on interest rates, which is expected to lean towards a hawkish tone given the sluggish progress in the disinflation process.
On the Swiss front, market expectations regarding the Swiss National Bank’s (SNB) rate-cut trajectory will influence the Swiss Franc’s movements. Although inflation remains below the 2% threshold, the SNB is less likely to implement a subsequent interest rate cut on June 20. Earlier statements by SNB Chairman Thomas J. Jordan highlighted minor upside risks to inflation expectations, driven by the weakening Swiss Franc, which has enhanced the competitiveness of Swiss exports in the global market.
USDCAD – Climbs Above 1.3750 as Traders Reduce Expectations for Fed Rate Cuts
The Canadian Dollar moved down after the rate cuts from BoC last week, and ahead of FED Decision tomorrow. The Canadian Economy is lower after the rate hikes steps from BoC, Now it is near to BoC Goal, So rate cuts are implemented before FED. Oil prices are slumped due to lower domestic demand makes worry for Canadian Dollar.
USDCAD is moving in an Ascending channel and the market has fallen from the higher high area of the channel
oncurrently, a decline in crude oil prices is exerting downward pressure on the commodity-linked Canadian Dollar (CAD), thus bolstering USD/CAD.
The release of robust US employment data for May has tempered expectations of a rate cut by the Federal Open Market Committee (FOMC). As a result, traders have adjusted their forecasts, with the likelihood of a rate cut at the September meeting decreasing to approximately 47%, down from 68% prior to the Nonfarm Payrolls (NFP) data release, as indicated by the CME FedWatch tool.
During the upcoming June monetary meeting on Wednesday, the US Federal Reserve (Fed) is anticipated to maintain interest rates within the range of 5.25%-5.50%, aiming to curb inflation towards the Fed’s 2% target.
Market participants are closely eyeing the US Consumer Price Index (CPI) inflation data scheduled for release on Wednesday, which could provide insights into the inflation trajectory and the future monetary policy outlook. Projections suggest that both the headline and core CPI figures are expected to show a year-on-year increase of 3.4% and 3.5% respectively for May.
Meanwhile, crude oil prices are witnessing a decline following statements from OPEC ministers indicating that there would be no increase in supply if prices remained weak. Given that Canada is a major source of crude oil imports for the United States, higher oil prices typically support the Canadian Dollar (CAD). However, the current trend of lower oil prices is contributing to the strength of USD/CAD.
USD INDEX – US Dollar Gains Further as Markets Await Fed Announcement and CPI Figures
The US Dollar moved higher ahead of US CPI data for the May month scheduled tomorrow, US CPI is expected to come at 3.4% as Headline, 3.5% in the Core inflation rate. FED Decision is expected to keep at 5.25% in the tomorrow meeting makes US Dollar keeps higher against counter pairs.
USD INDEX is moving in an Ascending channel and the market has rebounded from the higher low area of the channel
Despite encountering some initial fluctuations, the overall sentiment surrounding the robust US economy remains positive, suggesting that the USD’s upward trajectory may persist.
Market participants continue to closely monitor the upcoming release of the Consumer Price Index (CPI) data for May and the Federal Reserve (Fed) meeting scheduled for Wednesday. With Monday’s trading session lacking significant developments, investors are eagerly awaiting these pivotal events for potential market cues. The forthcoming data, coupled with the Fed’s decision, will offer valuable insights into the inflationary pressures and potential adjustments to the monetary policy path.
In the daily digest of market movers, expectations for the core CPI data for May indicate a slight deceleration to 3.5% year-on-year, while overall inflation is anticipated to remain steady at 3.4%. The Fed is widely expected to maintain interest rates at the current level of 5.5% during the June 15-16 meeting. Any deviation from this forecast could trigger notable shifts in market dynamics.
Furthermore, the Summary of Economic Projections and remarks by Fed Chairman Jerome Powell will play a crucial role in providing a comprehensive understanding of the economic outlook and potential policy adjustments. Investors will closely scrutinize these insights to gauge the future direction of the economy and financial markets.
GBPUSD – Pound Sterling Dips on Weak UK Employment Data, Fed Decision Uncertainty
The UK Unemployment rate came at 4.4% in the April month versus 4.3% printed in the March month, 140K Job losses printed in the April month versus 177K Joblosses printed in the First Q1 2024. Wage growth increased to 6.0% excluding Bonuses and including bonus 5.9% exceeded 5.7% expected rate. BoE hamper the rate cuts due to wage inflation increased to higher rate. GBP down after the reading came in decline side.
GBPUSD is moving in an Ascending channel and the market has reached the higher low area of the channel
Weakness in the GBP/USD pair stemmed from disappointing United Kingdom (UK) employment data for the three months through April, coupled with a resilient US Dollar (USD) amidst expectations that the Federal Reserve (Fed) will postpone interest rate cuts.
According to the UK Office for National Statistics (ONS), the labor market witnessed a decline for the fourth consecutive time, with employment decreasing by 140,000 workers in the three-month period ending April. Although this decline was less severe than the 177,000 reduction observed in the January-March period, the ILO Unemployment Rate rose to 4.4%, surpassing expectations of 4.3%. These labor market indicators suggest that businesses are grappling with the repercussions of the Bank of England’s (BoE) elevated interest rates.
On the other hand, wage growth exhibited resilience during the February-April period. Average Earnings Excluding Bonuses, a gauge of wage inflation, matched estimates and the previous reading of 6.0%. Additionally, Average Earnings Including Bonuses maintained a steady growth rate of 5.9%, upwardly revised from 5.7% and surpassing estimates of 5.7%. Heightened wage growth could potentially hinder the BoE’s inclination towards interest rate reductions.
Market dynamics indicate that the Pound Sterling is encountering selling pressure near the 1.2740 mark subsequent to a brief recovery against the US Dollar. The USD retains its strength as investors exercise caution ahead of the release of the United States (US) Consumer Price Index (CPI) data for May and the Federal Reserve’s interest rate decision scheduled for Wednesday. The US Dollar Index (DXY), tracking the Greenback’s performance against major currencies, consolidates near a monthly high around 105.40.
Projections suggest that monthly headline inflation may exhibit a slower growth rate of 0.1% compared to 0.3% in April, while annual figures are expected to maintain steady growth at 3.4%. Similarly, the annual core CPI, excluding volatile food and energy prices, is anticipated to decelerate to 3.5% from the previous release of 3.6%, with monthly figures sustaining the current growth rate of 0.3%.
The outcome of the CPI data will influence Fed policymakers’ stance on interest rates. Robust or higher-than-anticipated inflation figures could prompt policymakers to advocate for maintaining the current interest rate framework for an extended duration. Conversely, soft figures would bolster their confidence in the ongoing disinflation process.
The highlight for investors will be the Fed’s interest rate decision, with officials expected to maintain rates unchanged for the seventh consecutive time. Policymakers have reiterated their commitment to refraining from rate adjustments until sufficient evidence indicates a sustainable return of inflation to the desired 2% target. Market speculation regarding Fed rate cuts for the year suggests a single cut, possibly in the November or December meeting, while expectations for a rate cut in the September meeting have substantially diminished.
NZDUSD – Slips Below 0.6150 as Investors Await US CPI and Fed Rate Decision
The NZ Dollar moved down ahead of US FOMC Meeting is scheduled tomorrow, US CPI also scheduled. The RBNZ clear view of rate cuts started from Mid-2025 makes NZ Dollar stronger against counter pairs. Unlike Australian Economy, NZ Economy perfoming well and inflation is above 2% target.
NZDUSD is moving in Ascending channel and market has reached higher low area of the channel
With no significant economic data releases from New Zealand, the NZD/USD pair’s movement is largely dictated by developments surrounding the USD. Attention is particularly focused on the upcoming US Consumer Price Index (CPI) inflation data and the Federal Reserve (Fed) monetary policy meeting scheduled for Wednesday.
The persistently high inflation levels in the United States during the first quarter of this year have complicated the Fed’s decision-making process regarding interest rates. While there was a slight easing of CPI inflation in April, Fed officials are inclined to await further evidence before considering any adjustments to their benchmark rate. A positive May inflation report on Wednesday might prompt the Fed to delay any policy easing in the near future. However, if the data suggests otherwise, it could pave the way for potential rate cuts, leading to a depreciation of the US Dollar (USD) and potentially benefiting the NZD/USD pair.
Conversely, the robust employment report released last week has increased speculation that the Fed might adopt a more hawkish stance and postpone rate-cut plans, given the persistent elevation of inflation. MUFG analysts emphasized that the strength of the US jobs data reinforces the likelihood of the Fed maintaining its current policy stance for an extended period.
On a different note, the hawkish stance of the Reserve Bank of New Zealand (RBNZ) may continue to support the New Zealand Dollar (NZD) against the USD. The RBNZ is anticipated to uphold its existing policy stance until at least mid-2025, aiming to conduct a thorough evaluation of economic data before considering any policy adjustments.
CRUDE OIL – WTI Nears $77.50 on Expectations of Rising Summer Demand
The Energy research Firm Gelber and Associate said Oil demand will be higher in the summer season, Goldman Sachs predicted 1.3 Million Barrels per day demand in the market during summer season gives hopes for Oil prices to move upside.
XTIUSD Crude oil price is moving in the Descending channel and the market has reached the lower high area of the channel
During the Asian trading hours on Tuesday, the Intermediate (WTI) Oil price maintains its position around $77.50 per barrel, buoyed by anticipations of heightened fuel demand anticipated for the summer months. Analysts at the energy consulting firm Gelber and Associates underscored that while the broader macroeconomic environment remains less optimistic, the outlook for summer demand continues to lend support to Oil prices.
According to Goldman Sachs analysts, the expectation of robust summer transport demand is projected to result in a third-quarter deficit of 1.3 million barrels per day (bpd) in the Oil market.
However, the strong US jobs report released in the previous week has reinforced the Federal Reserve’s hawkish monetary policy stance. This suggests that the Fed is likely to sustain higher borrowing costs for an extended period, potentially curbing economic growth and dampening demand for Oil. Moreover, the strengthening US Dollar (USD) poses a downside risk to Oil demand, as it increases the cost of USD-denominated commodities like Oil for holders of other currencies.
The CME FedWatch Tool indicates a decline in the probability of a Fed rate cut of at least 25 basis points in September, dropping to nearly 49.0% from 59.5% recorded a week earlier.
Adding to market concerns, the prospect of a potential surplus in Oil supply has intensified following the decision by the Organization of the Petroleum Exporting Countries and its allies (OPEC+) to gradually ease voluntary production cuts from eight member countries, commencing in October. It is anticipated that by December, more than 500,000 barrels per day (bpd) will re-enter the market, with a cumulative total of 1.8 million bpd expected to return by June 2025.
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