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Market Recap
This morning, US President Biden confirmed he is pulling out of the 2024 election race and has endorsed his VP Kamala Harris as the Democratic nominee. So far, there has been very limited market reaction to the news with only a few prints across the whole market this morning in extremely quiet trade.
The slide continued on Wall St. on Friday with the Dow Jones closing -0.9%, the Nasdaq -0.8%, and the S&P 500 -0.7%. U.S. 10-year yields rose 4bps to 4.24%, while crude oil fell 3.1% to $80.30 a barrel. AUD/USD traded in a narrow 0.6681/0.6709 range before closing the week at 0.6685.
Into the London lunch, the greenback pulled back a touch after EUR/USD and GBP/USD found lows of 1.0877 and 1.2901, respectively. The antipodes also dipped to 0.6688 and 0.6018 while USD/JPY steadied around 157.50. USD/CAD traded in the middle of its range at 1.3710 ahead of Canada’s May retail sales release.
Canadian Retail Sales for May fell by 0.8% MoM, down from +0.6% and worse than expectations of -0.6%, with the core measure also weaker than expected. USD/CAD rose to highs near 1.3750 over the NY morning, with the USD a little stronger and the antipodeans falling to new respective lows of 0.6684 and 0.60135.
Wall St was weaker from the open, with indices sliding lower over the NY morning after opening near flat to be down around 0.5%. European markets remained soft in late trade, with the DAX closing down 1% on the day while losses elsewhere were around 0.5%.
Day Ahead
In China, the 1-year and 5-year LPRs, China’s benchmark loan rates, will be released today. The consensus is that both are unlikely to change in July, after the central bank kept the 1-year MLF rate on hold on July 15. Since Governor Pan took office last July, the PBoC has been prioritizing currency stability over domestic reflation. Macquarie Strategy describes such a strategy as “Hang in there until the Fed blinks.” With US economists expecting a first Fed rate cut in September, the PBoC could follow suit at that time.
After the widely watched Third Plenum wrapped up on July 18, a longer document, also called “Decision,” could be released this week. It may contain more details on things like fiscal reform and boosting business confidence. However, it may take years to implement and will not impact the economy in the near term. In Macquarie Strategy’s view, a shift in growth drivers is much more important than the grand vision laid out at top-level Party meetings. Such a shift occurred in 2021, ushering in the current Two-Speed model. Looking ahead, another shift could happen if rising trade protectionism forces policymakers to rely more on domestic demand to drive growth.
AUD/USD traded in a narrow 0.6681/0.6709 range on Friday with all key levels remaining intact. Demand rests in the 0.6640/50 region, while offering interest remains above 0.6800.
Economic Data to Watch
- New Zealand: June Trade Balance
- China: 1-Year, 5-Year Loan Prime Rate
- United States: June Chicago Fed National Activity Index
Disclaimer
The information provided in this daily market update is for informational purposes only and should not be considered as financial advice. Trading Forex and CFDs involves significant risk of loss and may not be suitable for all investors. Past performance is not indicative of future results. CA Markets does not guarantee the accuracy or completeness of the information provided, and we recommend consulting with a qualified financial advisor before making any trading decisions. Users are solely responsible for their own trading activities and decisions.