Powell hints at September rate cut, Dollar softer
The Fed kept interest rates on hold yesterday but signalled an easing in monetary policy at the next FOMC meeting in September. Powell stated that upcoming data would play a key role with specific emphasis on the labour market which has shown signs of a downturn. Today’s jobless claims number will be closely watched while the US manufacturing PMI data is also due out today.
The DXY index has fallen below the 104.00 mark with the Dollar trading at 1.0830 against the Euro and 1.2858 against the Pound. The recovery in the Yen continues to gain traction, with the currency trading at 149.69, over 2.0% firmer than yesterday’s opening level.
The rate hike in Japan and hawkish BOJ tilt, coupled with US rate cut hopes, is driving Yen strength. EM currencies have not reacted to the softer Dollar as another set of weak Chinese economic data and heightened geopolitical tensions weighed on EM markets. The Rand is currently trading at R18.24 after closing at R18.20 last night. Today, we have the Bank of England’s MPC meeting with markets expecting a cut of 25bps.
Gold holding steady after yesterday’s rally, Brent back above $80.00
Gold rallied nearly 1.6% yesterday as the Dollar retreated and tensions in the Middle East increased. Gold is currently trading unchanged at $2,445, while Platinum and Palladium are holding steady at $975 and $927, respectively.
Base metals had a strong day yesterday, closing higher across the board on the back of the dovish Fed. However, prices fell again this morning as the Chinese Caixin manufacturing PMI turned negative.
Iran’s promise to retaliate against Israel for the killing of the Hamas leader in Tehran, along with the softer Dollar, has seen the price of Brent crude jump to $81.50 this morning.