The Dollar saw a significant decline last week as market expectations for the Federal Reserve’s policy shifted, making a rate cut in September almost certain. The US CPI report indicated a cooling economy and easing price pressures, leading traders to anticipate rate cuts in September and possibly in December. Some are even betting on a cut in November. This change in sentiment pushed US stocks to record highs and lowered treasury yields. Despite this, the Dollar was only the second weakest performer, with the New Zealand Dollar taking the bottom spot due to a dovish statement from the RBNZ. The Canadian Dollar followed as the third worst performer.
On the other hand, the Japanese Yen emerged as the top performer of the week, possibly due to market intervention by Japan. The Yen’s future movement will depend on market participants’ actions and the upcoming BoJ meeting. The British Pound also performed well after expectations for an August rate cut by the BoE were dashed by strong UK economic data. The Euro and the Swiss Franc ended with mixed results.
In the US, stock markets surged to new highs, driven by optimism about Fed rate cuts. The CPI data further solidified expectations for a rate cut in September, with futures indicating a high probability of multiple cuts by the end of the year. The technical analysis suggests a positive outlook for the S&P 500 and the DOW.
The US 10-year yield declined along with changing Fed expectations, and the Dollar index is showing signs of weakness. The Yen experienced a significant rally, possibly due to market intervention, but its future movement depends on the upcoming BoJ meeting. The Nikkei suffered from the Yen’s strength, with a potential for a deeper pullback if support levels are breached.
The Sterling stood out as a strong performer following diminished hopes for an August BoE rate cut. The EUR/GBP pair suggests a downward trend, while GBP/CHF is showing strength. The EUR/USD outlook remains positive, with a potential rally towards 1.0979. The long-term picture shows a possible corrective pattern in progress, with a bottom possibly in place at 0.9534.
Overall, the markets are reacting to changing expectations regarding central bank policies and economic data, leading to shifts in currencies and stock markets. Investors are closely watching upcoming meetings and data releases to determine future trends and opportunities in the financial markets.