Today's Financial Highlights

Market Overview

Just yesterday, major news releases showed better-than-expected data for both the Aussie dollar and the U.S. dollar.

Australian Dollar (AUD): The AUDs employment change came in at 58.2K, up from 52.3K—a significant increase compared to the expected slowdown to 20.2 K. This sudden improvement has pushed back expectations for rate cuts. However, the unemployment rate is at 4.2%, which is ten basis points higher than the expected figure.

British Pound (GBP): The Pound's GDP was released as expected, holding steady at 0%. Over the past couple of years, GDP growth has remained stable, which has supported the GBPs strength overnight.

U.S. Dollar (USD): The dollar has found strength after data eased recession fears; Core retail sales m/m rose by 0.4%, Retail sales m/m increased by 1%, and unemployment claims came in at 227K—all better than expected. These figures show that both sales and employment remain stable and consistent with previous data releases.

Interest Rate Expectations: Although traders are pricing in rate cut bets for the upcoming September meeting, some analysts argue that the market is “overreacting to FED rate cuts,” suggesting that “cutting rates right now may prove more damaging to the economy than helpful.” Driven by recession fears, many investors are calling on the FED to cut rates to help boost the economy. Some analysts are now using the phrase, “the FED will be forced to cut rates.” As Warren Buffet says, “Be fearful when others are greedy, and greedy when others are fearful.”

Pound Sterling (GBP): One last data release is set for this Friday with Retail Sales m/m. Depending on the results, the strength of the Pound in the coming weeks might signal a possible rate cut either in the next month or in the last quarter of this year.

Japanese Yen (JPY): The Yen‘s weakness emerged after Japan’s Prime Minister, Fumio Kishida, announced that he wouldn‘t seek re-election as party chief, leading to a potential leadership change in Japan. The ruling Democratic Party, which has governed almost uninterrupted since 1955, will have to select a new leader to be Japan’s Prime Minister. This decision follows a fraud scandal involving Kishida, which proved too significant to ignore. Japan now watches who will step up to guide the nation forward. This uncertainty is reflected in the Yens stumble against the dollar and other currencies, including the Kiwi, which had been expected to weaken following a recent rate cut announcement.

Safe-Haven Currencies (CHF, JPY): The decline in safe-haven assets like the Yen and CHF has been noted as tensions in the Middle East eased after peace talks facilitated by the U.S. between Israel and Hamas. Depending on the outcome, there may be a de-escalation of war tensions and a wider conflict in the region, as Iran relies on Hamas in their military efforts. However, the presence of tensions is still evident, as shown by the rise in GOLD and SILVER, with traders and analysts seeking safer alternatives.

GOLD -GOLD positions rose after yesterdays trading showed growth into the supply zone, closing near the previous high. However, prices remain consolidated as markets await further developments before pushing prices upward. This was also fueled by traders' pricing in further bets on rate cuts in September by the FED.

SILVER -SILVER has risen above 27.725, finding major support at this level and gaining momentum for a bullish run. We expect further growth from SILVER as more price action develops. Similar to GOLD, we expect a market correction soon to provide a better entry point. However, there is also the possibility of prices suddenly surging upward in a parabolic manner, potentially reaching 29.018 and beyond. However, experience shows that it is easier to find a drop in the market than an increase.

DXY - The Dollar has gained momentum for buying after yesterdays better-than-expected data, placing the price within the 102.775 boundary. We expect further consolidation within this range, prompting markets to possibly return to consolidation until further data releases next week, leading up to the September meeting.

GBPUSD - We may see the Pound continue to break out of its range at 1.28508. However, there is a decrease in market momentum in this area, which may lead to a potential price break before a continued increase. Additionally, there have been previous discussions about the BOE considering a rate cut in the next month or in the coming quarter. With this in mind, we may see a possible rise followed by a strong drop.

AUDUSD - The Aussie dollar remains consolidated, supported by its economy‘s strength after easing concerns of a further slowdown in the jobs market. Bank of Australia Governor Michelle Bullock stated that despite signs of easing inflation, it is still “premature” to consider cutting interest rates. She warned that inflation remains “too high” and is not expected to return to the central bank’s 2-3% target until the end of next year. Last week, the RBA kept rates unchanged at 4.35% for the sixth straight meeting amid a resilient economy and persistent inflationary risks. With the RBAs hawkish stance, we expect to see further bullish runs from the Aussie dollar. Current prices are maintained between 0.66541 and 0.65869.

NZDUSD -The Kiwi dropped after a surprise rate cut. Earlier this week, the Reserve Bank of New Zealand slashed its benchmark interest rate for the first time since March 2020, lowering it to 5.25% and signaling more cuts in the coming months. Additionally, Governor Adrian Orr said on Friday that the central bank has achieved a strong level of confidence that low and stable inflation is back within its 1-3% target range. With such dovish commentary, we expect the Kiwi to further lose strength until the rate cuts are fully implemented. The current rise is likely due to traders booking profits in preparation for the next cut, using the data release to fuel further price movement.

EURUSD - The Euro saw a sudden drop with a single candle near yesterdays final trading hours, although early Asian trades have since recovered the decline. From a technical perspective, we see the Euro gaining further strength and continuing its bullish run after testing 1.10361. However, there is a potential for the price to fail to move beyond this point and resume a bearish trend.

USDJPY - The Yen has rebounded from its considerable drop, returning to trading above 146.512. We may have found the lowest point of the quarter, with the possibility of stabilization until the end of this period. The BOJ has also announced that it will be more cautious and gradual in its rate hike decisions despite having a stronger economy. With this in mind, we will continue to monitor the BOJs stance on rate cuts in the coming days and adjust our expectations accordingly.

USDCHF - The Franc has recovered with a single large candle above 0.87041. While its unwise to rely solely on a single strong candle, we observe that the price is consolidating above this zone, which may indicate stability at this level. This could help Switzerland's economy ease difficulties in trade caused by their expensive currency, but we expect further growth for the Franc to come into the markets soon.

USDCAD -The CAD is currently consolidating, showing strength despite the sudden rise in USD strength. The loonie‘s strength is not widely covered by other investors and analysts. While we have a general idea of where the loonie’s strength may be coming from, we continue to wait for further confirmation before providing a detailed analysis. If you are interested in this, we invite you to read our next analysis. Canada sends about 75% of its exports to the United States, including oil. U.S. crude oil futures settled 1.5% higher at $78.16 a barrel.