An important inflation gauge for the Federal Reserve showed a slight easing in June. The personal consumption expenditures (PCE) price index rose 0.1% for the month and 2.5% year-over-year, matching Dow Jones estimates. Core inflation, excluding food and energy, increased by 0.2% monthly and 2.6% annually. These figures align with expectations and keep inflation above the 2% target. The Fed is unlikely to change rates at its next meeting but is expected to cut rates in September, the first reduction after the Covid pandemic. While Fed officials are cautious, the gradual cooling of inflation supports the likelihood of rate cuts this year.
POUND
UK inflation remained at the Bank of England’s 2% target in June, exceeding analyst expectations of 1.9%. Services inflation held steady at 5.7%, and core inflation (excluding energy, food, alcohol, and tobacco) stayed at 3.5%. Higher restaurant and hotel prices contributed to inflation, while clothing and footwear costs declined. Increased consumer spending on leisure activities was noted. Despite easing headline inflation, BOE policymakers are cautious about a potential August rate cut due to persistent services inflation and labour market pressures. The BOE’s main interest rate has been at 5.25% since August 2023.
GBPUSD (Daily). After breaking through the resistance at 1.2850 two weeks ago, Pound found its way back. 1.2850 may become the support, but traders expect BOE to cut interest rate this week, the first cut in 4 years. We expect this pair to trade below 1.2850.
YEN
USDJPY (Daily). BOJ interventions managed to pull the pair down 6% from its peak. After the USDJPY broke the bullish projection line around 158.00, the price found support around 152.00. If Bank of Japan remains hawkish this week, we expect USDJPY to break the 152.00 level.
OIL
US crude oil prices fell over 1% on Friday, marking a third consecutive weekly decline due to demand concerns in China outweighing strong US economic growth. West Texas Intermediate (WTI) oil dropped 3.8% this week and closed at $75.95 per barrel. Despite the US economy growing at 2.8% in Q2, China's oil imports fell by 10.7% year-over-year in June, with refined product imports down 32%. Concerns grew after China implemented surprise rate cuts, signalling struggles to boost its economy and energy demand.
WTIUSD (Daily). Oil prices are affected by news such as production costs, supply and demand. We are looking to buy when the price is close to 72.40 and exit around 84.00.
GOLD
Gold prices rose on Friday as US Treasury yields declined amid optimism for an interest rate cut by the Federal Reserve in September. This optimism is followed by data showing modest US price increases in June, spot gold rose to $2,390 per ounce. Analysts noted that weaker US data indicates waning inflationary pressures and economic activity. Lower rates make non-yielding bullion more attractive. Physical gold demand in India surged after the country reduced import duties on gold and silver, boosting gold premiums to a decade high.
XAUUSD (H4). After the decline from the all-time high of 2483, Gold made another lower-low and higher-low and formed a bearish channel. The price is trading around 2390.00 (50% of Fibonacci level). We expect the Fed to remain cautious in the FOMC meeting this week, which could boost the dollar and pressure Gold.
Fullerton Markets Research Team
Your Committed Trading Partner
