Interest rate projections are tricky, with changing expectations every second. Recently, Federal Reserve Governor Michelle Bowman said interest rates is expected to remain steady "for some time," outright rejecting the notion that there will be rate cuts in 2024, contrary to other members. Bowman warns that lowering rates too quickly could lead to reinflation, and she remains open to further rate hikes instead, if progress on inflation stalls or reverses. Fed officials, like San Francisco Fed President Mary Daly, have also expressed concerns about recent "bumpiness" in inflation data while Federal Reserve Governor Lisa Cook says rate cuts are contingent on economic performance while highlighting the Fed's shift towards considering both inflation and job market conditions in its policy decisions.
EQUITY
US markets closed mixed on Tuesday, with the Nasdaq and S&P 500 gains while the Dow Jones fell, inverse of what happened on Monday. Fed Governors Bowman and Cook emphasised caution regarding interest rate cuts, while economic indicators showed a slight dip in consumer confidence and record home prices in April. Notable corporate news included Carnival's improved earnings outlook and Nvidia's recovery after losing $400 billion in market cap in just 3 days.
GOLD
Gold prices held steady ahead of key inflation data. Fed officials' hawkish comments and rising yields are pressuring gold, countering its hedge appeal. Upcoming GDP and PCE reports could influence rate cut expectations, currently projected for September. Gold saw its price retreat from an all-time high last month but has yet to break the market structure.
OIL
Oil's been on a bit of a pullback phase after a 10% gain since its low in early June. Price may have been waiting for inventory data from EIA to be released today. The Middle East situation is keeping everyone on edge, and we're expecting a busy summer for oil demand. The American Petroleum Institute reported an unexpected rise in U.S. oil inventories, contradicting analyst predictions of a decrease and raising concerns about weaker demand.
CURRENCY
The dollar index remained steady ahead of PCE inflation data that is preferred by the Federal Reserve. Fed officials said they are not rushing to cut interest rates, adding to hawkish risk. Markets are also anticipating the first US presidential debate between Joe Biden and Donald Trump, as well as the upcoming French elections. The Australian dollar strengthened after reporting higher-than-expected inflation data in May, raising rate hike expectations. The yen is trading near intervention level at 160 per dollar, while bitcoin rebounded slightly to $62,000 a pop.
