Forex Fundamental

Forex Fundamental News Facts for 28th June, 2024

Forex Fundamental News Facts for 28th June, 2024

[Quick Facts]

1. Tokyo inflation accelerates, and BOJ is expected to raise rates in July.
2. Biden and Trump will come to a face-to-face debate.
3. U.S. continuous jobless claims rose to highest since the end of 2021.
4. USD/JPY rose above 161, making the market less worried.
5. Is the Bullish Belief in Gold Still There?
6. Core PCE in Focus Ahead of French Elections.
7. Political Risk Aversion Rubs Its Eyes.
8. Euro, Yen Under Pressure, USD Bid.
9. French Vote: The Tailrisk That Would Tip Pound to Euro Above 1.22.

[News Details]

  1. Tokyo inflation accelerates, and BOJ is expected to raise rates in July:

Tokyo’s inflation accelerated in June, potentially prompting the Bank of Japan (BOJ) to raise interest rates as early as July.

Japan’s core Consumer Price Index (CPI) in Tokyo, excluding fresh food, surged at an annualized rate of 2.1% in June, surpassing expectations.

This Tokyo figure serves as a leading indicator for national data, which will be released in July.

The BOJ aims to normalize monetary policy as key indicators move back above the 2% target


  1. Biden and Trump will come to a face-to-face debate:

President Joe Biden and former President Donald Trump engage in a face-to-face debate during the 2024 presidential election.

Despite their advanced age, voters scrutinize their leadership and policy directions.

Biden emphasizes steady leadership and understanding of national issues, while countering health-related questions.

Trump aims to prove his capability to lead despite ongoing investigations, highlighting economic success and diplomatic stance


  1. U.S. continuous jobless claims rose to highest since the end of 2021:

Initial jobless claims rose to the upper range of 194,000-243,000 this year.

Continuous jobless claims reached 1.84 million, the highest level since the end of 2021.

These trends suggest a prolonged job search for the unemployed and signal economic challenges.

Labor market conditions are loosening amid slower economic growth


  1. USD/JPY rose above 161, making the market less worried:

The USD surged to a four-decade high against the JPY.

Despite Tokyo’s rising CPI and U.S. bond yield drops, the JPY weakened.

The JPY declined 6% against the USD this quarter and 12% year-to-date, outpacing other G10 currencies.

In a low-volatility environment, the market remains less concerned after USD/JPY surpassed 160 without intervention


  1. Is the Bullish Belief in Gold Still There?:

At the start of March this year, gold embarked on an epic rally that captured global attention. As gold reached record highs, it attracted countless fans in a bull market. Traders holding long positions in gold revelled in profits, and buying gold became almost a belief.

However, just when many believed gold could easily rise to $2,500 or even $3,000, the price abruptly dropped from a high of $2,450 to $2,300 and then collapsed. In hindsight, the gold market played a tricky game. Similar to historical patterns, the market initially advocated momentum, enticing traders to enter. Then, in a sudden twist, the price reversed course.

The Surge in Gold Is Over

Technically, gold plummeted nearly $150 from its highs and hasn’t recovered. Recently, gold prices returned to the peak of $2,300 per ounce, attempting to establish a top. But can gold rally again?

Several factors contribute to the uncertainty:

Cost of Holding Gold: As gold prices rise, the cost of holding gold increases, dampening investor enthusiasm. China’s central bank, the world’s largest gold buyer, paused its holdings in May, signalling caution. Even bullish sentiment is tempered by concerns about a decline from the highs.

Fed’s Rate Cut Uncertainty: The Federal Reserve’s rate-cut predictions have been less accurate. Officials initially expected three rate cuts this year but were disrupted by unexpected inflation. Now, some officials claim there will be no rate cuts. The tight US labor market adds complexity. While other factors contribute to job market weakness, the sentiment in the gold market has shifted bearish.

Geopolitical Factors: The ongoing Middle East and Russia-Ukraine conflicts impact gold’s safe-haven demand. As geopolitical tensions persist, gold’s role as a long-term value preserver and inflation hedge remains relevant.

Gold Will Rise in the Future

Despite the alarming decline, it’s premature to declare gold’s collapse. The factors supporting gold haven’t vanished entirely. Although gold hovers around $2,300, most traders hesitate to sell.

Additional points to consider:

US Dollar and Geopolitics: The US dollar, a global trade backbone, faces challenges. Countries seek to diversify assets away from dollar dependence. Gold, a traditional safe-haven asset, benefits from this trend.

Central Banks and Reserves: Despite high prices, central banks plan to increase gold reserves due to macroeconomic and political uncertainty. The People’s Bank of China’s pause in gold purchases doesn’t signal the end of diversification efforts.

Fed’s Rate Cut: While geopolitical risks persist, the market focuses on the Fed’s upcoming rate cut. Other central banks have already cut rates. Although Fed officials remain hawkish, data trends suggest an eventual cut, impacting gold in the long term.


  1. Core PCE in Focus Ahead of French Elections:

Trump’s Strong Showing: The recent debate between Joe Biden and Donald Trump has fueled speculation about Trump’s potential return to the oval office. Investors anticipate lower corporate taxes, tougher trade relations, and increased advances on Wall Street if Trump were to win. The prospect of additional tariffs on China has also influenced the dollar’s performance against the Australian and New Zealand currencies.

Core PCE Inflation: Dollar traders closely monitor the core Personal Consumption Expenditures (PCE) price index. Expectations are for a slowdown in inflation to 2.6% year-on-year from the previous 2.8%. This data could impact the Federal Reserve’s decision-making, with market participants currently predicting a 70% chance of a quarter-point rate reduction in September.

Yen Intervention Watch: The Japanese yen continues to weaken against the dollar, prompting concerns among Japanese authorities. Despite unnoticed acceleration in Tokyo’s Consumer Price Index (CPI), the possibility of a 10-basis-point hike by the Bank of Japan (BoJ) in July remains elevated. The recent replacement of the top currency diplomat with a financial regulation expert may signal a heightened risk of intervention to stabilize the yen.

French Elections: In Europe, attention shifts to the first round of the French elections. If no candidate secures an absolute majority, the top two contenders and those receiving over 12.5% of registered votes proceed to a second round. Opinion polls suggest that Le Pen’s far-right National Rally will secure the most seats but not a majority. A hung parliament could lead to prolonged political stalemate, impacting the euro as the Eurozone’s second-largest economy faces uncertainty


  1. Political Risk Aversion Rubs Its Eyes:

Election Fever: A blizzard of political risks looms on the horizon. The U.S. presidential debate kicks off the November race, while French and British parliamentary polls approach. A global year of elections reaches a crescendo, each with its unique domestic saga and international policy implications.

Fear and Investment: Fear of change doesn’t necessarily translate into sound investment decisions. While political outcomes remain uncertain, there are few straightforward macro market bets. Central bank policies and tech booms intersect with fiscal concerns and debt sustainability.

Market Reactions: French debt and equity wobble in response to the snap election, but the true impact remains uncertain. British stocks hover near record highs. Surprisingly, the euro and pound barely flinch in foreign exchanges as poll dates approach.

Wall Street Stoicism: Wall Street and global stocks maintain all-time peaks. The VIX ‘fear index’ remains subdued, even amidst pandemic aftermath and contentious elections. It’s a waiting game—a puzzle of political promises versus actual actions.

Balancing Act: Rather than second-guessing winners and losers, focus on weathering the downturn. Regular rebalancing schedules matter more than reacting to volatility. Opportunities emerge, but emotions mustn’t drive decisions.

Currency Conundrum: Currency markets face complexity. An already strong dollar may gain from market nerves, tariff threats, or geopolitical stress. Currency volatility remains low, but risk aversion signals are increasing. Mispricings abound, from the euro to Switzerland’s franc.

Political Uncertainty: As the U.S. presidential election looms, political risk becomes a potent force affecting asset prices. Investors closely watch the matchup between President Joe Biden and former President Donald Trump. Divergent tax policies could sway markets, with a Democratic sweep potentially raising taxes—a negative for equities.

Tech Dominance: The market’s ascent has been disproportionately driven by tech behemoths like Nvidia, whose shares surged 150% this year. However, this concentration poses risks. If the case for holding tech and growth stocks weakens, a sudden exit by investors could destabilize markets.

Economic Balance and Fed Policy: Maintaining the delicate balance between cooling inflation and resilient growth is crucial. A significant deviation from this “Goldilocks” scenario could disrupt the Federal Reserve’s plans to cut rates later in the year.

Navigating the Road Ahead:

Political Landscape: The upcoming election intensifies uncertainty. Investors should monitor divergent tax policies and potential volatility. A contested or prolonged election could further roil markets.

Tech Concentration: While big tech’s dominance seems justified, investors must recognize the risks. If the music stops, a sudden exit from tech stocks could create problems.

Rate Cut Cycles: The Fed’s rate-cut decisions matter. Historical data shows that rate cuts during challenging economic environments led to worse returns. Investors should consider the context when interpreting rate cuts.


  1. Euro, Yen Under Pressure, USD Bid:

Mixed Mood in Markets:

European stocks experienced mixed performance due to economic and consumer survey results.

German stocks outperformed, while the UK’s FTSE 100 faced challenges despite a softer pound and rising oil prices.

US Crude Rebounds:

US crude oil surpassed the critical $82 per barrel resistance, signaling a positive trend.

The April to June selloff is behind us, with room for further gains.

Both technical and fundamental factors support this outlook.

US Economic Data:

Q1 GDP growth slowed to 1.4%, slightly better than expected.

Sales and consumer spending declined, but investors focused on the uptick in first-quarter inflation.

Despite a widening trade deficit and other economic indicators, the slowdown didn’t appear catastrophic.

Fed Expectations and Bond Sales:

Dovish Fed expectations led to increased appetite for US treasuries.

Strong 7-year bond sales followed earlier successful 2 and 5-year bond sales.

Investors anticipate up to two rate cuts by year-end.

Eurozone Inflation and French Election:

Preliminary inflation data for June will impact the European Central Bank (ECB).

The French election outcome is crucial for the euro.

Marine Le Pen’s National Rally securing one-third of the vote could weigh on the euro.

The spread between French and German 10-year yields may widen further.

The EUR/USD pair faces downward pressure, potentially falling below 1.0660.

USD/JPY and Intervention Risk:

USD/JPY trading above 161, with intervention risk growing.

Yen bears eye limits, while intervention concerns persist


  1. French Vote: The Tailrisk That Would Tip Pound to Euro Above 1.22:

Base Case: Pound-Euro Below 1.18:

The French legislative vote is crucial.

Marine Le Pen’s RN Party is expected to perform well.

A ‘cohabitation’ outcome between the French President and Prime Minister may not adversely affect the Euro.

The Euro could continue recovering, with GBP/EUR slipping below 1.18.

Fat Tail-Risks: 1.22 and Above:

Unfavorable scenarios for the Euro:

RN secures an outright majority, giving them more influence in parliament.

The left-wing alliance New Popular Front wins as voters shift allegiances.

French equities may sell off in the case of a left-wing majority government.

Goldman Sachs suggests high election participation, favoring extremes (left and right).

GBP/EUR Outlook:

If the New Popular Front (NFP) wins, GBP/EUR could rise.

NFP’s spending plans require significant borrowing, impacting bond markets.

Crédit Agricole assumes negatives related to French and UK votes are priced in.

In the long term, Bank of England vs. European Central Bank policies will determine exchange rate moves.

Payment requirements should consider short-lived politically-inspired fluctuations


🔥Important News releases on This WEEK :

27/06 Thu 3:30pm GBP BOE Gov Bailey Speaks

27/06 Thu 6:30pm USD Final GDP q/q + Unemployment Claims + Durable Goods Orders m/m 

27/06 Thu 8:00pm USD Pending Home Sales m/m

28/06 Fri All Day NZD Bank Holiday

28/06 5:30am JPY Tokyo Core CPI y/y

28/06 Fri 7:00am USD President Biden Speaks

28/06 Fri 6:30pm CAD GDP m/m

28/06 Fri 6:30pm USD Core PCE Price Index m/m

28/06 Fri 8:00pm USD Revised 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

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