Pediafx.com – Tuesday, August 29, 2023
Gold
According to the Macro Overview Asia on Tuesday (August 29, 2023), the price of gold rose this morning. Gold reached its daily high at $1,925.77 per troy ounce, up $5.78 compared to the previous week’s closing.
Ahead of the release of US core personal consumption expenditure (PCE) inflation data and labor market data on Thursday and Friday, the yield on US Treasury bonds, also known as Treasury yields, further declined this morning, allowing gold to continue its upward movement.
Both Treasury bonds and gold are considered safe-haven assets, but gold does not provide yield. Therefore, when Treasury yields rise, gold becomes less attractive, and vice versa when yields decline, the appeal of gold increases.
Yesterday, the yield on the 10-year Treasury bond dropped to 4.204%, and today it touched 4.182%. If this downward trend continues, there is a chance for gold to rise further during the European trading session.
Oil
The price of oil (CLS10) fluctuated between $79.76 and $80.11 per barrel during the Asian trading session. The potential supply disruption caused by the tropical storm Idalia is driving the increase in oil prices. The storm is reportedly heading towards Florida, United States.
Additionally, the increasing number of Chinese travelers can boost short-term oil demand. Data from China shows a 13% surge in weekly flights in China for the week ending August 20.
However, market participants are still awaiting US economic data this week, which could determine whether the Federal Reserve will raise interest rates again or not. Interest rate hikes can also put pressure on oil prices, particularly due to the strengthening of the US dollar and a slowdown in economic growth, which affects oil demand.
The sentiment towards oil remains mixed, but there is a possibility of strengthening during the European trading session.
EURUSD
EURUSD rose 191 points (19 pips) to 1.08383 during the Asian trading session, continuing its upward movement from the beginning of the week. The euro initially faced negative sentiment after the speech by European Central Bank (ECB) President Christine Lagarde last Friday. Lagarde did not provide any indication of whether interest rates would be raised in September or not.
The fact that EURUSD has continued to rise since the beginning of the week indicates that market participants are waiting for other factors, namely the US PCE inflation data and non-farm payrolls (NFP) report, to be released later this week.
These data will provide a clearer picture of whether the US Federal Reserve will raise interest rates again or if it has reached the terminal rate (the peak of the interest rate cycle). Ahead of the data release on Thursday and Friday, attention is focused on Germany’s consumer confidence data at 13:00 WIB during the European trading session.
The forecast from Trading Central shows a reading of -23 in August, an improvement from the previous month’s -24.4. A negative reading actually indicates pessimism towards the economy, but if it improves from the previous month, it can be a positive sentiment for the euro. During the European trading session, there is a chance for EURUSD to rise further.
GBPUSD
GBPUSD rose 300 points (30 pips) to 1.26322 during the Asian trading session, moving further away from the 10-week low reached last Friday.
Yesterday, GBPUSD also managed to strengthen despite the increased probability of a Fed rate hike in November.
This suggests that market participants may have already priced in another rate hike, resulting in less significant movements. Considering these conditions and market participants still awaiting the release of US PCE inflation data and NFP, there is a chance for GBPUSD to rise again during the European session.
USDJPY
USDJPY briefly dropped 237 points (23 pips) to 146.307 during the Asian trading session. However, data from Japan earlier today showed that the unemployment rate in July increased to 2.7% from the previous month’s 2.5%. This release should have had a negative sentiment for the yen, which could cause USDJPY to rise.
It is worth noting that USDJPY is in the intervention zone set by the Japanese government since September last year. At that time, USDJPY broke above the 145,000 level for the first time since 1998 and was intervened, resulting in a sharp decline. However, it subsequently rose again above 151,000, and intervention was carried out again in October 2022.
The possibility of intervention makes it difficult for USDJPY to rise sharply and could potentially decline during the European trading session.
Nasdaq
The Nasdaq index rose 128 points to 15,097 at the beginning of the week and reached its daily high at 15,127.
Nasdaq continued its upward movement since last Friday, despite the Federal Reserve stating that they would raise interest rates if necessary. On the other hand, market participants also see the Fed’s optimism that the US economy will notexperience a sharp slowdown as a positive factor for the stock market.
The technology sector, which is heavily represented in the Nasdaq index, has been performing well recently, with strong earnings reports from major tech companies. This has contributed to the positive sentiment surrounding the index.
However, it is important to note that market sentiment can change quickly, and the release of upcoming economic data, such as the US PCE inflation and NFP reports, could influence the direction of the market. Investors will be closely watching these data releases for any signs of potential policy changes by the Federal Reserve.
Overall, during the European trading session, there is a possibility for the Nasdaq index to continue its upward movement, but it will likely be influenced by various factors, including economic data and investor sentiment.
