1. Despite differences in opinion over the size of the next increase in interest rates in September, the Wall Street banks aren’t declaring an end to rate increases by the Federal Reserve.
2. On Wednesday, policymakers raised the federal funds rate goal to a range of 2.25% to 2.5% in response to the strongest cost pressures in 40 years. This brings the total rise from June to July to 150 Basis Points.
For the second consecutive meeting, the Fed raised its benchmark rate by 75 Basis Points on Wednesday, and Chair Jerome Powell predicted much tighter monetary policy. According to the Incoming Statistics, he indicated a comparable rise in September may be fair, albeit the advice was less specific than it had been after other recent meetings.
3. The Federal Open Market Committee is determined to get inflation back to 2%.
4. The news that rising inflation caused the US gross domestic product to contract by 0.9% in the second quarter caused gold prices to rise by as much as 1.3%, hitting a three-week high.
EUR/USD: This pair failed once again in the 1.0250/60 range, causing a quick jump to the sub-1.0200 region. If the pair fails to break through this resistance zone, it is expected to decline more slowly, with extremely strong support near the weekly lows, or about 1.0100.
- The EUR/USD is fading from its prior bull run to the 1.0250 level.
- The Bears face decent support in the 1.0100 neighborhood.
GBP/USD: The GBP/USD pair had a sharp decline from a one-month peak reached earlier this Friday, or about mid-1.2200s. In the first hour of the North American session, the retracement decline continued unabatedly, pushing spot prices to a new daily low at the 1.2100 level.
- GBP/USD falls dramatically from a one-month high as some USD buying emerges.
- The upbeat US PCE report might have revived Fed rate hike bets and favored the USD bulls.
- Bears may keep on waiting for a persistent break under the 1.2100 zone before making fresh bets.
Stock futures rose early Friday as the market attempted to prolong the rise that started after the Federal Reserve raised interest rates on Wednesday. If the rise continues until the conclusion of normal trading hours on Friday, the S&P 500 will conclude the month with its best month since November 2020.
Notably, the S&P 500, Dow, and Nasdaq 100 ended regular trading Thursday with increases of 1.21%, 1.03%, and 0.92%, respectively. Surprisingly, these increases came after the Fed announced a 75 basis point interest rate boost on Wednesday.
Gold rose as the US economy shrank for the second quarter in a row, pushing the USD and Treasury prices lower and casting doubt on the Federal Reserve’s ability to battle inflation.
After a report said that inflationary pressures on consumer spending caused the US GDP to drop 0.9% in the second quarter, gold prices went up as much as 1.3% to a three-week high.
We anticipate several important events this week, such as the NFP, unemployment rates, interest rates, and trade deficits, which will have a high impact on currencies like the USD, CAD, AUD, and Sterling.
- Traders wait for the NFP report, which comes out on the first Friday of every month. This week’s NFP news will be released on August 5th, giving traders important details regarding potential market swings. On the same day, the unemployment rate report for both the United States and Canada will come out on August 5, which will give traders a prior directional assumption about the currency market. A figure that is greater than anticipated should be seen negatively (bearish) for the USD, whilst a figure that is lower than anticipated should be viewed favorably (bullish) for the USD. Likewise for CAD as well.
- The 4th of August is a significant day for both USD and CAD. We anticipate data on the nation’s trade balance, which shows how a country manages trade imbalances, as well as the nation’s merchandise trade. A higher than expected value on the report is taken as a positive for the currency and vice versa.
- Another major news on the same day to look out for, would be the BoE Interest Rate Decision that will affect some of the major pairs. A statistic that is higher than anticipated should be viewed as good (bullish) for the pound, while a figure that is lower than anticipated should be viewed as negative (bearish).
- On the 2nd and 3rd of August, the AUD and NZD currencies have several impactful news items, among which the Australian retail sales data and New Zealand employment change report will prompt relevant pairs to move along with the general market sentiment. The AUD will get hit by another high-impact piece of news on the 2nd of August regarding the country’s interest rate decision. A result that exceeds expectations should be seen positively (bearish) for the AUD, whereas a figure that falls short of expectations should be interpreted negatively (bullish).