Trump Survives Shooting: China’s Trade Surplus, Mixed US Data
Last week’s market movements were quite eventful, with key data releases and political developments influencing the FX market.
- China: It was reported that the Chinese Balance of Trade came in stronger than expected for June at $99.05 billion, above the forecast of $85 billion level. However, the GDP Growth Rate YoY suggests Q2 reading at 4.7%, lower than the previous 5.3%, below the anticipated expectations of 5.0%. The industrial production YoY holds marginal weakness at 5.3% against 5.6% prior but a significant drop in retail sales to 2% from the previous 3.7%.
- United States: The June US PPI came in at +0.2% MoM, in line with expectations and picking up slightly from the previous month’s revised 0%. However, the Michigan Consumer Sentiment Preliminary figure dropped to 66.0 from the previous 68.2, missing expectations of 68.5. These mixed signs add to the ongoing uncertainty regarding the outlook of the US economy.
- Most expectations center on the Fed Chair’s Speech later today as traders eye possible clues for future monetary policy, based on developing conditions for rising inflation and economic data fluctuations.
Major Currency Pairs
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- EUR/USD: The pair still maintained this volatile characteristic, reacting to the releases from the US and the Eurozone. The most recent soft US inflation figures gave the Euro some support, sending the pair a little higher. Further direction is expected to come from decisions out of the ECB, while the market waits.
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- GBP/USD: The British Pound was seen to hold its gains at 2024 highs against the USD, bolstered by stronger-than-anticipated UK GDP growth data. However, possible rate cuts by the Bank of England over cautious economic growth forecasts tempered the outlook somewhat.
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- The USD/JPY showed some yen strength, paring back recent losses, partly due to intervention speculations and tweaks to bond-buying programs from Japanese officials. The expectations around changes to Fed policy keep this pair in focus, too.
Commodities and Cross Rates:
- Oil: Prices have been volatile, with US crude currently mixed. There was a little relief off the news that Storm Beryl is unlikely to hit Texas infrastructure, easing thus some supply concerns. However, there is still caution ahead of Powell’s speech and potential demand outlooks.
- Gold: Prices moved closer to their all-time highs due to speculations of a rate cut by the Fed and on the back of continuing economic uncertainty. The precious metal acted as a haven for investors seeking refuge against the current volatility in the markets.
Geopolitical and Economic News
Over the weekend, former President Donald Trump survived an assassination attempt during a campaign rally in Butler, Pennsylvania. Trump was shot in the ear but managed to escape with minor injuries. The incident has sent shockwaves and raised security concerns ahead of the Republican National Convention in Milwaukee (Hindustan Times) (Outlook India).
Trump addressed the situation, stating on his social media platform that he would not allow the shooter to disrupt his campaign plans. The convention, expected to draw over 50,000 attendees, will now proceed with heightened security measures. This has added yet another layer of unpredictability to the political environment, potentially influencing markets and investor behaviour (Hindustan Times) (Outlook India).
Additional Political News
The UK is gearing up to host the European Political Community (EPC) meeting on July 18, 2024, at Blenheim Palace. This significant event will bring together around 50 European leaders to discuss pressing issues such as support for Ukraine, energy security, and illegal migration. Prime Minister Rishi Sunak emphasized the importance of this meeting for fostering cooperation across Europe on shared challenges (Gov.uk).
In other news, the UK government is focusing on alleviating the cost of living crisis. Recent figures show a rise in poverty levels, with nearly a million more people in poverty compared to the previous year. The government has extended the Household Support Fund to provide financial aid to vulnerable households, and benefits payments are being distributed as usual in July. Additionally, new measures for free childcare will be implemented over the next few years, expanding the current offerings to younger children (The Independent).