Forex Fundamental News Facts for 12th July, 2024

Forex Fundamental News Facts for 12th July, 2024

➖➖➖➖➖➖➖➖➖
[Quick Facts]
➖➖➖➖➖➖➖➖➖

1. Federal Reserve’s Daly Prioritizes Labor Market Focus
2. Inflation Moderates in Key Swing States, Favorable for Biden
3. Fed’s Goolsbee: June CPI Signals Gradual 2% Inflation Path
4. Japanese Yen Surges, Prompting Intervention Concerns
5. U.S. Initial Jobless Claims Exceed Expectations
6. Balancing Optimism: U.S. Inflation Spurs Rate Cut Expectations
7. Trump’s Victory Projection Boosts Bitcoin to $150K by 2025
8. ECB Adopts Cautious Approach on Rate Cuts Amid Election Risks
9. Oil Rises on Slowing U.S. Inflation, Strong Summer Demand
10. Gold Holds Steady Above $2,400 Amid Soft CPI Data and Rate Cut Speculation

➖➖➖➖➖➖➖➖➖
[News Details]
➖➖➖➖➖➖➖➖➖

1. Federal Reserve’s Daly Prioritizes Labor Market Focus:

The recent fall in inflation data has been a “relief,” according to San Francisco Fed President Mary Daly.
Price pressures and the labor market are expected to slow further, providing a rationale for a rate cut.
The economy is heading toward one or two interest rate cuts this year, as projected in the June Fed policymaker forecasts.
While inflation is likely to cool further, the question is no longer whether policy is restrictive, but when to loosen the reins.
The focus has shifted to the importance of the labor market, beyond just combating inflation.

➖➖➖➖➖➖➖➖➖

2. Inflation Moderates in Key Swing States, Favorable for Biden:

Inflation rates fell last month in major cities across swing states (Georgia, Pennsylvania, and Arizona).
This moderation in prices could aid President Joe Biden’s campaign, as voters’ views of the economy are influenced by inflation.
Falling inflation in swing states may also benefit Biden’s campaign.

➖➖➖➖➖➖➖➖➖

3. Fed’s Goolsbee: June CPI Signals Gradual 2% Inflation Path:

Chicago Fed President Goolsbee believes the latest inflation data is positive and indicates progress toward the 2% target.
He closely monitors housing inflation to determine when interest rates should be cut.
The Fed may consider a pause or another rate cut after the initial cut, depending on inflation data.

CPI Report Overview:
The recent CPI report is encouraging for the Federal Open Market Committee (FOMC) in their fight against inflation.
Consumer prices declined by 0.1%, mainly due to lower energy prices and a modest increase in food prices.
Excluding food and energy, the core CPI increased by just 0.1%, the smallest rise since January 2021.
Core goods prices continued to decline, while core services inflation advanced only 0.1%.

Economic Data and Rate Cut:
Recent economic data support the possibility of a rate cut.
Over the past three months, core CPI increased at a 2.1% annualized pace, the smallest change since March 2021.
Other indicators, such as employment trends, also point to less heat in the U.S. labor market.
While a rate cut at the July FOMC meeting is unlikely, a reduction in the federal funds rate by 25 bps in September and another 25 bps in December is anticipated.

June CPI Reading:
Consumer prices declined 0.1% in June, the first outright decline since spring 2020 during the COVID pandemic.
Falling gasoline and electricity prices offset a rise in utility gas service.
Food inflation strengthened slightly, but overall energy deflation contributed to a decrease in the year-over-year change in the headline CPI.

Core Index and Shelter Inflation:
Excluding food and energy, prices rose 0.1%, the smallest increase since January 2021.
Shelter inflation showed signs of slowing, with owners’ equivalent rent and rent of primary residences increasing minimally.
Discretionary spending categories like airfares, lodging away from home, and recreation services also declined.

Rate Cut and Employment Trends:
The case for a rate cut in September continues to build.
Disinflation is not solely driven by goods; core CPI has increased at a 2.1% annualized rate over the past three months.
Nonfarm payrolls grew at the slowest pace since January 2021, and employment growth remains concentrated in less cyclically-sensitive industries.
Chair Powell acknowledges that “elevated inflation is not the only risk we face.”

➖➖➖➖➖➖➖➖➖

4. Japanese Yen Surges, Prompting Intervention Concerns:

The USDJPY exchange rate experienced sharp volatility after US CPI data release.
Speculation arose about Japanese authorities intervening to support the yen.
Japan’s Vice Finance Minister confirmed intervention to boost the yen.

The Japanese yen experienced a significant daily rise against the U.S. dollar, reaching its highest level since late 2022. This surge was triggered by fresh U.S. inflation data, which revealed the lowest consumer price index (CPI) reading in over three years. Currency experts attribute the yen’s rally to short positions and an unexpected CPI outcome. However, Japanese authorities are closely monitoring the situation, as they aim to stabilize their ailing currency. While there is no concrete evidence of intervention, suspicions suggest that the Ministry of Finance may have discreetly stepped in during the recent broad dollar sell-off. Japan’s history of currency interventions underscores their commitment to mitigating sharp currency moves that could impact households and businesses. The yen’s sustained pressure began after the Bank of Japan ended its negative interest rate policy, prompting vigilance from policymakers.

The Japanese yen recently strengthened against the U.S. dollar due to fresh inflation data.
Currency experts attribute the yen’s rally to short positions and an unexpected CPI outcome.
Japanese authorities are closely monitoring the situation and may intervene to stabilize the currency.
Historical interventions demonstrate Japan’s commitment to managing sharp currency fluctuations.
Investors and professionals should stay informed about yen movements and potential policy actions.

Japanese Yen Strength and Intervention:
The Japanese Yen has performed well due to alleged intervention by Japanese authorities.
Finance Minister Shunichi Suzuki and outgoing top currency official Masato Kanda did not confirm intervention but expressed concerns about rapid fluctuations.
Yen rallied against the Dollar, European majors, and commodity currencies, suggesting possible intervention.

Market Performances:
New Zealand Dollar (NZD) is the worst performer due to RBNZ’s dovish stance and manufacturing sector deterioration.
Sterling is the second strongest currency, supported by strong UK GDP data and relative political stability.
Australian Dollar and Euro are tied for the third strongest.

Technical Analysis (NZD/JPY):
NZD/JPY is likely corrective after a decline from 89.93.
Key support levels: 55-day Exponential Moving Average (EMA) at 96.14 and 95.52 cluster (38.2% retracement of 89.93 to 99.01 at 95.54).
A decisive break of 95.52/4 may signal a larger scale correction.

Market Movements:
Nikkei fell sharply due to Yen’s strength.
Hong Kong HSI is up, and China Shanghai SSE is slightly up.
US markets had mixed performance.

Fed’s Inflation Outlook:
US June CPI data showed better-than-expected disinflation progress.
Fed officials expect rate cuts in September, with a 93% chance.
Over 90% probability of two rate cuts by year-end.

New Zealand Manufacturing Decline:
New Zealand BusinessNZ Performance of Manufacturing Index fell sharply in June.
Production, new orders, and employment declined significantly.
BusinessNZ expressed concern over the economic slowdown and recessionary conditions.

EUR/USD Technical Outlook:
Intraday bias in EUR/USD remains upside for retesting 1.0915 resistance.
Break of 1.0915 resistance could lead to further gains.
Larger picture suggests a corrective pattern in progress.

➖➖➖➖➖➖➖➖➖

5. U.S. Initial Jobless Claims Exceed Expectations:

US initial jobless claims declined more than expected, reaching the lowest level since the end of May.
Labor market signs indicate a cooling trend due to economic activity slowing down after the Fed’s interest rate hikes in 2022 and 2023.

➖➖➖➖➖➖➖➖➖

6. Balancing Optimism: U.S. Inflation Spurs Rate Cut Expectations:

US CPI rose 3% year-on-year in June, with a 0.1% drop from the previous month.
Core CPI increased 3.3% year-on-year, the lowest level since April 2021.
While some sectors (housing, auto insurance, etc.) drove inflation, others (airline fares, used cars) declined.
The report suggests positive signals as inflation gradually decreases.
Expectations for the Fed to lower rates in September have strengthened.
However, the market’s optimism about five rate cuts over the next year may be excessive, considering future inflation trends.

➖➖➖➖➖➖➖➖➖

7. Trump’s Victory Projection Boosts Bitcoin to $150K by 2025:

Donald Trump to Speak at Bitcoin 2024 Conference:
Former U.S. President Donald Trump has been confirmed as a keynote speaker at the Bitcoin 2024 conference in Nashville, Tennessee.
The event, one of the largest Bitcoin conferences globally, is scheduled from July 25th to 27th.
Trump’s pro-crypto stance aligns with his recent support for the American Bitcoin industry, advocating financial freedom and growth on the global stage.
His participation highlights the divide among crypto voters, contrasting with President Joe Biden’s harsh stance toward cryptocurrency.

Voting Postponement and SEC’s Anti-Crypto Rule:
The conference coincides with the House of Representatives postponing their vote to override Biden’s veto on the SEC’s anti-crypto rule (SAB 121).
Originally set for July 10th, the vote has been rescheduled to July 11th.
Representative Patrick McHenry criticized the delay, emphasizing the need for efficient decision-making.

Impact on Memecoins and Prediction Market:
Trump’s announcement had a significant impact on the crypto meme market.
Trump-inspired memecoin “Doland Tremp” surged by 2.4% in the past 24 hours.
Conversely, Biden-inspired memecoin “Jeo Boden” declined by 16.7% during the same period.
Polymarket’s prediction market data shows Trump leading in the “Presidential Election Winner 2024” category.

➖➖➖➖➖➖➖➖➖

8. ECB Adopts Cautious Approach on Rate Cuts Amid Election Risks:

The recent UK general election not only reaffirms political stability but also highlights the country’s robust economic position. Amid global polarization and a shifting European political center, the UK stands out as an attractive destination for business and a secure hub for global engagement.

Sophisticated international financial counterparts share supportive opinions. In February, Barclays made its largest-ever investment in the UK by acquiring Tesco’s banking arm and significantly increasing lending within our UK consumer and corporate businesses.

The new UK government, led by Chancellor Rachel Reeves, demonstrates ambition in securing growth and investment. However, with limited fiscal space due to a high debt-to-GDP ratio and the loss of sterling’s reserve currency status, private finance becomes crucial for supporting investment and growth.

Here are three strategies to achieve this:

Leverage Financial Services: The UK should view its financial services sector as a strategic national asset, akin to the US approach. Our banks, asset managers, and private equity firms wield global influence, enabling finance and investment flows. London’s concentration of foreign-owned financial institutions underscores its expertise and regulatory strength. Recent acquisitions, like BlackRock’s purchase of Preqin, showcase UK financial innovation.

Revive Equity Culture: Over the past two decades, UK tech companies like Darktrace have been acquired by private equity or listed in New York. We must compete in growth sectors like climate tech and meditech. Pensions reform can encourage investment in growth equity, and streamlining listing requirements would attract institutional funds. Removing stamp duty on share purchases over £1,000 and reducing dividend taxes would further boost equity participation.

Empower Individual Savers: Unlocking the benefits of a revived equity culture shouldn’t be limited to corporations. Approximately £430 billion in investible cash savings, including cash ISAs, lies with 13 million bank customers. Resuming the sale of government shares in NatWest signals public share ownership. Regulatory reforms should guide consumers toward trusted advisers, especially as unregulated advice on social media poses risks. Simplifying ISAs and aligning tax incentives with investor outcomes will enhance UK capital markets.

European Central Bank’s Approach to Interest Rates:
The European Central Bank (ECB) will cautiously lower interest rates due to political upheaval and risks to inflation.
After an initial quarter-point reduction in June, further cuts are expected to resume in September, gradually reaching a deposit rate of 2.5% over the next year.
The ECB faces challenges in assessing economic pitfalls, strong inflation pressures, and a potentially fading recovery from stagnation.

Political Uncertainty and Economic Impact:
US presidential elections in November and the possibility of another term for Donald Trump pose risks to the euro zone’s economy.
France’s turmoil evokes memories of Europe’s sovereign-debt crisis.
The ECB avoids pre-committing to rate paths, emphasizing data-dependency.

Market Expectations and Forward Guidance:
Markets anticipate one more rate reduction this year but remain cautious.
The ECB refrains from giving forward guidance, emphasizing data-driven decisions.

Labor Shortages and Inflation Concerns:
Service-sector firms face acute labor shortages, hindering output despite strong demand.
Wage gains contribute to inflationary pressures in the service sector.

Outlook and Fed Influence:
Next week’s ECB meeting is expected to be uneventful, with focus on potential rate cuts in September.
Some speculate that the Federal Reserve’s interest-rate cuts may prompt the ECB to act more rapidly.
However, no immediate rate reduction is anticipated.

➖➖➖➖➖➖➖➖➖

9. Oil Rises on Slowing U.S. Inflation, Strong Summer Demand:

Oil Prices and Rate Expectations:
Oil prices have risen due to a weaker-than-expected US CPI print, leading to expectations of a Federal Reserve rate cut in September.
ICE Brent is approaching US$86/bbl, and constructive oil balance supports price stability.
The view is that ICE Brent will average US$88/bbl in the current quarter.

Concerns Around Chinese Demand:
Chinese demand has been a market concern.
June crude oil imports averaged 11.35m b/d, down 10.4% YoY, with cumulative imports for the year down 1.6% YoY.
The IEA estimates that Chinese oil demand contracted YoY in April and May, affecting global oil market dynamics.

Natural Gas and Metals:
Front-month Henry Hub gas futures declined due to increased US natural gas storage.
Miner BHP suspended Western Australia Nickel operations due to oversupply in the global nickel market.
Gold rallied above $2,400/oz, driven by US consumer prices and geopolitical factors.
European cocoa demand grew despite cocoa price strength.
Sugarcane crushing in Brazil increased YoY, impacting sugar production.

USDA WASDE Report:
The USDA is expected to adjust US corn and soybean ending stocks.
Global supply estimates for corn, soybeans, and wheat will also be revised.

Supply and Demand Dynamics:
OPEC+ production cuts have tightened the oil market, offsetting supply increases from non-member nations.
The International Energy Agency (IEA) predicts global crude consumption to grow by over 2 million barrels per day this year.
However, this growth will be balanced by factors such as rising electric car sales, improved fuel efficiency, and reduced oil use for electricity generation.

Future Outlook:
The IEA expects overall oil demand growth of 0.97 million barrels per day in 2024 and a similar level in 2025.
While strong summer fuel demand in the US supports prices, structural shifts and changing energy patterns will continue to shape the oil market.

➖➖➖➖➖➖➖➖➖

10. Gold Holds Steady Above $2,400 Amid Soft CPI Data and Rate Cut Speculation:

Gold Prices and Interest Rates:
Gold prices fell slightly in Asian trade but remained strong due to softer-than-expected U.S. inflation data.
The dollar’s drop and bets on a September interest rate cut contributed to gold’s performance.
Spot gold reached $2,400 an ounce, close to a record high, with futures also showing strength.

Impact of Inflation Data:
Consumer price index data indicated lower inflation, raising hopes that the Federal Reserve (Fed) would cut rates.
Traders priced in an 82% chance of a 25 basis point rate cut in September.

Interest Rates and Precious Metals:
Lower interest rates reduce the opportunity cost of investing in non-yielding assets like gold.
Other precious metals, including platinum and silver, were also set to benefit from lower rates.

Copper Imports and Economic Recovery in China:
Copper prices retreated as China’s imports of unwrought copper and copper products fell 3% year-on-year in June.
Broader Chinese imports unexpectedly shrank, raising concerns about weak local demand and sluggish economic recovery.
China’s trade surplus surged, but increased trade tariffs on key exports, such as electric vehicles, could offset gains.

Upcoming Focus on Chinese Economy:
Attention now turns to the Third Plenum of the Chinese Communist Party for cues on the economy and stimulus.

➖➖➖➖➖➖➖➖➖

🔥Important News releases on This WEEK :

10/07 Wed 8:30pm USD Crude Oil Inventories

10/07 Wed 11:01pm USD 10-y Bond Auction

11/07 Thu 12:00pm GBP GDP m/m

11/07 Thu 6:30pm USD CPI m/m,y/y & Unemployment Claims

11/07 Thu 11:01pm USD 30-y Bond Auction

12/07 Fri 12:00am USD Federal Budget Balance

12/07 Fri 6:30pm CAD Building Permits m/m

12/07 Fri 6:30pm USD PPI m/m & Core PPI m/m

12/07 Fri 8:00pm USD Prelim UoM Consumer Sentiment

N.B. Time mentioned here is on Gmt +6

➖➖➖➖➖➖➖➖➖

➖➖➖➖➖➖➖➖➖

➖➖➖➖➖➖➖➖➖

Sources :
– CNBC, Bloomberg, Reuters, Fastbull, Yahoo Finance, CNN, ForexFactory News, Myfxbook News etc

Prepared to you by “Akif Matin“

Join our FWE telegram, Facebook Page & Group

➖➖➖➖➖➖➖➖➖