Global Market Insights - Forex, Futures, Stocks

Stocks’ asthmatic reaction keeps dollar in demand

Duration:: 4m
Broadcast on:: 26 Jun 2024
Audio Format:: mp3

US stocks edge higher amidst quiet newsflow. French elections are around
the corner. Aussie and loonie benefit from hotter CPI reports. Yen remains
under pressure.

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Welcome to another episode of Global Market Insights, brought to you by XM.com, where we provide meaningful and informative content about the events that affect market trends and shape global markets. It's Wednesday the 26th of June, 2024, and you're listening to the Market Comment Podcast by Aheleus Jorkelopulos. I'm Maria Vasirides, thanks for joining us at XM.com. The US dollar is trying to find its footing as the market prepares for Thursday's presidential debate between Trump and Biden and Friday's PCE inflation report. Yesterday's FedSpeak did not hold any surprises with the Fed's cook talking vaguely about the possibility of rate cuts at some point. Today's calendar includes new home sales for May, a sector that Chairman Powell commented on during the last Fed press conference, but the market chooses to ignore at this juncture. The Fed doves are really pinned into the corner as the window of opportunity for a rate cut ahead of the November elections is shrinking fast. If data over the next 10 days, predominantly the PCE report, the ISM surveys, and next Friday's non-farm payroll print, does not portray a weakening economy experiencing lower inflationary pressures, then a doves shift at the 31st of July Fed meeting will probably become a summer dream. In the meantime, US stock indices had a mixed session yesterday with the S&P 500 index rising on the back of the resurgent Nvidia stock. This index is currently around 4% in the green for June, and almost 15% higher in 2024 as the technology sector is close to recording another 10% plus monthly increase. This rally is sizable considering the performance of the CAC40 index following the recent European elections outcome. The French index is just 2% higher in 2024, and its outlook remains cloudy as the first round of the parliamentary elections is just around the corner. The Aussie and the Luni are in the green today, as the inflation reports from both Canada and Australia managed to produce an upside surprise. In the case of the former, the headline inflation rate edged higher to 2.9% year-on-year, complicating somewhat the outlook for the BOC. The market is still pricing in a 56% probability of another 25-basis-point rate cut in July, as on Monday, Governor McLem appeared relatively confident that the BOC would hit its inflation target. It would be interesting to see if next week's key data releases justify the governor's optimism. Similarly, the Aussie dollar pair has jumped higher as the RBA remains one of the most hawkish central banks. Today's stronger-than-expected inflation report from May has probably confirmed Governor Bullock et al's decision to discuss the possibility of a rate hike at the last meeting, contrary to the rest of the world preparing or already easing monetary policy. Chances of a rate hike at the August 6 meeting have jumped to 33%, as the market is now on the lookout for further comments from RBA members. Next week's plethora of data could add credence to the possibility of a rate hike, but the decisive figure will come on July 31, when the CPI for the second quarter of 2024 will be released. Dollar Yen is currently trading a tad below the 160 yen level, as despite the end April double intervention, the market feels confident enough to provoke the Japanese authorities. To be fair, the BOC is partly responsible for this ongoing yen weakness, as it has consistently failed to appease the market. This week's data prints, and particularly Friday's Tokyo CPI report, could allow the BOC to adopt a more hawkish stance going forward, and potentially positively surprise the market with a significant tapering of its bond-buying program at the July 31 gathering. Thanks for listening, this is today's market comment here at XM.com. [BLANK_AUDIO]