PREVIOUS TRADING DAY EVENTS – 01 August 2023
RBA forecast about headline inflation would return to within its 2-3% target range by late 2025, from the current 6%.
Governor Philip Lowe: “Higher interest rates were working to cool demand. The pause this month would again provide time to assess the impact of a 400 basis point jump in rates.”
“The recent data are consistent with inflation returning to the 2–3% target range over the forecast horizon and with output and employment continuing to grow,” said Lowe, adding that further tightening will be dependent on data and the evolving risk assessment. In a relief for policymakers, headline inflation slowed more than expected in the second quarter while retail sales posted their biggest fall this year in June.
“While the RBA retains a tightening bias, we expect the hurdle to another rate hike to be high. It would take an upside surprise to the economic data from here… for the RBA to shift its assessment of the outlook,” said Belinda Allen, a senior economist at CBA.
Both National Australia Bank and Goldman Sachs now see a hike in November, bringing the cash rate to 4.35%, compared with expectations for two hikes before.
“If the labour markets turn out more resilient than expected, the chance for the RBA to extend the tightening to 2025 is also a possibility that can’t be ruled out.”
“While today’s report discusses data from June, this continued strength in the labour market is likely to keep Fed officials hawkish,” said Eugenio Aleman, chief economist at Raymond James in St Petersburg, Florida.
Manufacturing employment likely rose by 5K jobs last month according to estimates. Overall nonfarm payrolls are forecast to rise by 200K jobs in July after increasing by 209K in June. The Labor Department is due to release the employment report for July on Friday.
“A small margin of slack has opened in the economy, which will help inflation to slow further in the second half of 2023,” said Bill Adams, chief economist at Comerica Bank in Dallas.
Source: https://www.reuters.com/world/us/us-job-openings-fall-more-than-two-year-low-june-2023-08-01/
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Winners vs Losers
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News Reports Monitor – Previous Trading Day (01 August 2023)
Server Time / Timezone EEST (UTC+03:00)
- Midnight – Night Session (Asian)
The Reserve Bank of Australia (RBA) has decided to keep the Cash Rate Unchanged. It was a surprise for the market since it was expected that the decision would be an increase of 25 bp. The Board states that the higher interest rates are on levels that can keep a sustainable balance between supply and demand in the economy and that they will continue to do so. This belief, plus the uncertainty surrounding the economic outlook, the decision resulted in interest rates being kept steady this month. The market reacted with AUD depreciation at 7:30. About 40 pips drop for AUDUSD.
- Morning – Day Session (European)
PMIs for the Manufacturing sector were released for all major regions:
Eurozone: The eurozone manufacturing sector experienced more contraction at the start of the third quarter, Production volumes, new orders, employment and purchasing activity all declined at faster rates than in June. The Survey showed worsened business conditions across Germany’s manufacturing sector at the start of the third quarter. Output, new orders and factory gate prices all fall at faster rates.
U.K.: Manufacturing PMI drops to a seven-month low with accelerated rates of contraction in output, new orders and employment.
Canada: PMI figure is just below 50 points indicating that the manufacturing sector remained in contraction territory during July, but only just. Further deterioration of operating conditions in July was observed despite a rise in production.
U.S.: The sector’s business health also declined during July, according to the latest PMITM survey from S&P Global. Another monthly contraction in new orders, as domestic and external demand conditions remained muted. New orders dropped and companies increased employment faster, having greater confidence in the outlook for output.
During the PMI releases the USD was showing more strength, appreciating against major currencies such as EUR and GBP. No major shocks were observed but rather steady movements in one direction.
The U.S. ISM Manufacturing PMI was released at 17:00 along with the JOLTS Job Openings figure which was actually reported lower in line with labour market cooling expectations. The PMI index rose to 46.4 from the previous 46.0 figure, but given it is below the 50 level it is still in contraction. These figures released had no major impact on the USD pairs.
General Verdict:
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FOREX MARKETS MONITOR
EURUSD (01.08.2023) Chart Summary
Server Time / Timezone EEST (UTC+03:00)
Price Movement
With the release of the Manufacturing PMIs, the market did not experience any major shock but rather steady movements. The EURUSD was moving on an intraday downward trend with moderate volatility. The move is mostly attributed to the USD strengthening as shown on the DXY chart above.
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EQUITY MARKETS MONITOR
NAS100 (NDX) 4-Day Chart Summary
Server Time / Timezone EEST (UTC+03:00)
Price Movement
The breakout of the triangle for NAS100 has broken to the downside as the U.S. stock market starts to show more volatility. The index was close to the resistance of 15815 USD but eventually reversed. The RSI showed signs of bearish divergence with its lower highs and that signal was eventually completed after the drop took place yesterday. The index continues to drop early today as well.
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COMMODITIES MARKETS MONITOR
USOIL (WTI) 4-Day Chart Summary
Server Time / Timezone EEST (UTC+03:00)
Price Movement
Crude is moving steadily upwards with moderate volatility. It remarkably remains on the upside. The price is moving upwards but retracements also take place after a rapid climb that happens occasionally. Still, it remains above the 30-period MA. This week OPEC-JMMC Meetings are taking place and are probably going to cause a distortion in the path of Oil though.
XAUUSD (Gold) 4-Day Chart Summary
Server Time / Timezone EEST (UTC+03:00)
Price Movement
The drop that happened on the 27th is attributed to the USD strengthening that took place after the FED and ECB rate decisions, causing the Gold price to drop since it is denominated in USD. Retracement followed after the price found strong support near 1942 USD/oz. The next day on the 28th of July, retracement followed and the price settled around the mean near 1955 USD/oz/. It later continued with an upward path but with no strong signal that an uptrend had started. Gold’s price had actually reversed starting from the 31st of July until the 1st of August crossing the MA on its way down and finding support at nearly 1941 USD/oz.
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News Reports Monitor – Today Trading Day (02 Aug 2023)
Server Time / Timezone EEST (UTC+03:00)
- Midnight – Night Session (Asian)
The quarterly employment data and unemployment rate of New Zealand came out early during the Asian session. Employment change was reported 1%, lower than the previous 1.10% figure and the unemployment rate was recorded higher, to 3.6% from 3..4%, in the June quarter, while total employment increased 4% in the past year and has hit an all-time high of 69.8%. NZD pairs were affected by depreciation at the time of the release. NZDUSD dropped more than 20 pips at that time and continues the downward movement even more until the European session approaches.
- Morning – Day Session (European)
At 15:15 an intraday shock is expected to take place affecting the USD pairs since important early labour data are released. The ADP NF Employment change figure is expected to be reported a lot lower, 195K versus the previous 497K. Will this big deviation from the previous figure actually going to happen though?
U.S. Crude Oil figures might have an impact on Oil but I am not expecting a shock. Oil prices rise steadily currently with the last 2 reports showing figures being negative. Production cuts seem to have a long-lasting effect as data suggest that barrels in inventories are less and less every week.
General Verdict:
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