July 29, 2024
CURRENCIES
Key points:
- US core PCE y/y: Unchanged at 2.6%, missing estimates of 2.5%.
- Interest rate probabilities: Unmoved, with a September cut fully priced in.
For real-time high-impact data and event releases, see the DailyFX Economic Calendar.
Detailed analysis:
- PCE inflation gauge: Unchanged at 2.6% in June, below market expectations of 2.5%.
- PCE price index: Fell to 2.5% from 2.6% in May.
- Personal income m/m: Fell more than expected to 0.2%.
Market reaction:
- US Dollar: Apathetic, with little new information for traders ahead of the weekend.
- Interest rate cuts: Markets continue to price in a 25 basis point cut at the September 18 FOMC meeting, with potential cuts also seen in November and December.
Upcoming events:
- FOMC meeting: Traders will look for guidance from Chair Powell on upcoming rate cuts.
- US Dollar index (DXY): Trading around the 38.2% Fibonacci retracement level at 104.37 and the 200-day simple moving average. A new driver is needed ahead of next Wednesday’s Fed meeting.
Gold market:
- Gold prices: Nudged around $5/oz. higher after the inflation report, remaining in a multi-month range.
- Resistance levels: Briefly broke resistance two weeks ago but quickly returned to a range that started in early April.
STOCK MARKET
Key highlights:
- Stock market fragility: The S&P 500 and Nasdaq Composite recently experienced their worst single-day drops since 2022. The S&P 500 fell over 1%, and the Nasdaq dropped more than 2.3%, while the Dow Jones Industrial Average rose by 0.6%.
- Upcoming market drivers: A Federal Reserve meeting, the July jobs report, and earnings from major tech companies (Apple, Amazon, Microsoft, Meta) will influence market direction in early August.
Federal Reserve meeting:
- Monetary policy decision: The Fed will announce its decision on rates next Wednesday, with markets expecting rates to remain steady.
- Economic updates: Core PCE index rose 2.6% in June, the lowest annual increase in over three years. CPI also showed a significant decrease.
- Labour market: Job openings are back to pre-pandemic levels; the unemployment rate is at its highest since November 2021.
- Rate cut expectations: Markets are pricing in the first rate cut in September, with investors watching for signals from Fed Chair Jerome Powell.
July jobs report:
- Expected data: Economists predict 175,000 nonfarm payroll jobs added, with the unemployment rate holding at 4.1%.
- Labour market trends: June saw 206,000 jobs added, with the unemployment rate at 4.1%. Signs of labour market cooling are being debated as either normalization or significant deterioration.
Big tech earnings:
- Earnings reports: Tech giants Apple, Amazon, Microsoft, and Meta will report earnings. The market is sensitive to these reports, as seen with the recent sell-off in tech stocks.
- Market reaction: Truist co-chief investment officer Keith Lerner noted that recent pullbacks are due to high expectations and rotations into other market areas. Stocks missing Wall Street estimates are seeing significant negative reactions.
Additional updates:
- Corporate earnings: 171 members of the S&P 500 are expected to report quarterly results, including AMD, Arm, Boeing, McDonald’s, and Starbucks.
- Economic indicators: Updates on job openings, services, manufacturing activities, and consumer confidence are on the calendar.
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