Market Update: July 15th
Essential points for today.
The market exhibits a cautious optimism during early European trading on Tuesday. There’s been backlash against US President Donald Trump’s recent tariff threats, alongside criticism of Federal Reserve Chairman Jerome Powell in light of China’s second-quarter GDP figures.
Trump has warned that if Russian President Putin fails to negotiate a peace deal with Ukraine within 50 days, significant tariffs will be levied against Russia.
In his Tuesday BBC interview, Trump expressed disappointment in Putin but added, “I’m not finished with him.”
On another note, late Monday, Trump took aim at Powell once again, asserting that interest rates fall within the 4.25% to 4.50% range, contradicting Powell’s earlier statements.
Turning to China, its economy grew by 5.2% in the second quarter, slightly overshadowing the anticipated 5.1% growth, yet this does represent a slowdown from the 5.4% increase in the first quarter.
Retail sales in June disappointed, showing a 4.8% drop, whereas industrial production saw a surprising 6.8% increase during the same period.
Even with China’s somewhat optimistic outlook, investors are remaining cautious. The US Consumer Price Index (CPI) data for June is set to be released later today.
This inflation data will be crucial for assessing the potential extent and timing of the Fed’s interest rate cuts. Consequently, traders are taking profits from their long positions in the US dollar after its recovery from a four-year low.
Despite that, the US dollar’s downside seems limited, particularly noted in the USD/JPY pair.
In Japan, government bonds faced sharp selling, with yields rising amid financial concerns related to political uncertainty. This ongoing turbulence in the domestic bond market is also affecting the Japanese yen.
According to the Asahi Shimbun, there’s speculation that Japan’s ruling coalition might lose its majority in the July 20 Senate election, heightening the risks of political instability at a time when trade negotiations with the US are also underway.
Looking at the EUR/USD pair, it’s climbing back to 1.1700, boosted by a modest performance of the US dollar against other major currencies. Attention is now on potential developments regarding trade talks between the EU and the US, along with upcoming industrial production data from Germany and the Eurozone.
A report from the Wall Street Journal noted that the EU is preparing to impose tariffs on US products, including aircraft and medical devices, worth 72 billion euros ($84 billion) if an agreement isn’t reached by August 1.
For GBP/USD, there’s a notable improvement in risk appetite, pushing it towards 1.3450 and providing support for the British pound.
China’s economic resilience offers some comfort, with AUD/USD hovering around 0.6550. The NZD/USD pair is also moving toward the 0.6000 mark, representing a reasonable gain for the day.
Meanwhile, USD/CAD is stuck in a narrow range near 1.3700 due to new pressures in oil prices alongside the dollar. Traders are now looking towards inflation data from Canada and the US for clearer direction.
WTI crude has dropped to trade below $65.50, hitting a weekly low, largely unaffected by US trade tensions.
Gold appears ready to rebound, eyeing a retest of the 23.6% Fibonacci retracement level from the April rally at $3,377. Current technical setups seem to favor buyers.
