Yesterday started with the employment report from Australia, which came slightly on the soft side, however, the AUD kept crawling higher in the Asian session with risk sentiment being positive. In the European session, the UK released employment data with mixed outcomes. While earnings were down and Jobless Claims rose, the Unemployment Rate unexpectedly fell by two percentage points. This contributed to the GBP’s strength in today’s trading. Despite this, the GBP trailed behind the NZD as the strongest major currency as optimism in risk assets continued.
US PPI data showed a smaller-than-expected increase of 0.1%, below the anticipated 0.2%, with the YoY rate dropping from 2.7% to 2.2%. Core PPI, excluding food and energy, also fell from 3.0% to 2.4%. Although this may not directly improve the CPI, it was still enough to further enhance risk sentiment. As a result, the USD weakened and yields declined.
The dollar saw the most significant drop against riskier currencies like the NZD, GBP, and AUD, while it remained nearly unchanged against the CHF. The data also provided a boost to US markets, with the Nasdaq gaining over 400 points and closing above 19,000. The inflation report offered some hope for US rates, which ended the day lower, particularly on the shorter end of the curve.
Today’s Market Expectations
The Australian Wage Price Index for Q2 is expected to rise slightly to 0.9% from the previous 0.8%. However, the year-over-year (Y/Y) figure is anticipated to decrease to 4.0% from 4.1%. The Reserve Bank of Australia (RBA) noted that wage growth appears to have peaked, but it remains above the level consistent with their inflation target.
In the UK, the unemployment rate is projected to increase to 4.5% from 4.4% in the European session. Average earnings including bonuses are expected to drop to 4.6% from 5.7%, while average earnings excluding bonuses are predicted to be 5.4%. Recently, the Bank of England reduced interest rates by 25 basis points to 5.00%. The market is currently pricing in a total of 43 basis points of easing by the end of the year, with a 62% probability of no change at the next meeting.
For the U.S., the Producer Price Index (PPI) is expected to show a year-over-year increase of 2.3%, down from 2.6% previously. The month-over-month (M/M) measure is seen steady at 0.2%, while Core PPI is anticipated to drop to 2.7% Y/Y from 3.0%. The M/M reading for Core PPI is expected to decrease to 0.2% from 0.4%. The market’s main focus will shift to the U.S. Consumer Price Index (CPI) report, which is set to be released the following day.
Yesterday started slow, with the price action in markets being calm, but the volatility picked up during the day as sentiment improved and stocks and risk assets making some decent gains. We opened four trading signals, remaining mostly long on stock indices, and ended up with three winning trading signals and one losing signal.
Gold Keeps Knocking at Record Highs
Gold experienced a significant recovery last week, rebounding nearly $100 from its low of $2,364 after an earlier dip. The price climbed back above the 20-week Simple Moving Average (SMA) on the weekly chart, a key level that sellers failed to break, reinforcing the 20-week SMA as a strong support point. This has contributed to a continuous rise in gold prices since 2022, with an increasingly compelling case for buying on dips, particularly given the global economic slowdown and the initiation of rate cuts by the Federal Reserve and other major central banks. Yesterday Gold retested the previous highs but buyers left it at $2,477 once again.
XAU/USD – Daily chart
GBP/USD Reaches the 20 SMA After Bouncing Off the 100 SMA
The highlight of yesterday’s European session was the release of the UK jobs report, which supported the GBPUSD rise despite lower earnings. Despite persistent doubts about the accuracy of the data, it showed a notable decline in the unemployment rate. The stronger-than-expected unemployment rate and increased appetite for market risk have propelled the GBP/USD pair higher. As of now, the pair is up 0.7% on the day, trading at the 1.2870 level.
GBP/USD – Daily Chart
Cryptocurrency Update
Bitcoin Retreats After Failing at MAs
Bitcoin’s price weakened again this morning amid ongoing geopolitical tensions and a cautious risk environment. Cryptocurrency investors were further discouraged by a conversation on X (formerly Twitter) between Republican presidential candidate Donald Trump and Tesla CEO Elon Musk, which made no mention of cryptocurrency regulations. Although Trump has expressed support for the cryptocurrency sector, even speaking at a recent conference, he has rarely addressed the issue in broader forums. Following this interview, Bitcoin briefly dipped below $58,000, but as risk sentiment improved during the U.S. session, it climbed back toward $61,000.
BTC/USD – Daily chart
Ethereum Consolidating Above $2,500
Ethereum has been showing a pattern of lower highs since March, indicating a potential downturn in August. After peaking at $3,830, Ethereum’s price fell below $3,000 in June. Although buyers managed to push the price above the 50-day SMA, recent selling pressure led to another bearish reversal. As a result, Ethereum’s downward trend persisted, with the price dropping below the 200-day SMA. Yesterday, Ethereum briefly fell to $2,000 before rebounding to $2,400.
ETH/USD – Daily chart
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