General Market Analysis 29/07/2024

Stocks Rally After Inflation Data – Dow Up 1.6%

US stock markets received a boost on Friday following a challenging week, as the PCE Price Index data aligned with expectations, raising hopes for a September rate cut by the Fed. The Dow led the gains, finishing the day up 1.64%, followed by the S&P 500 which rose by 1.11%, and the Nasdaq which gained 1.03%. US Treasury yields fell across the board, with the 2-year yield dropping 5.4 basis points to 4.389% and the 10-year yield decreasing by 5.6 basis points to 4.200%, while the dollar remained stable against most major currencies. Oil prices fell again amid ongoing discussions about a ceasefire in Gaza, with Brent crude down 1.5% to $81.31 and WTI crude off 1.4% to $77.16. Gold, however, saw a rise due to the weakening yields, increasing by 0.8% to close the New York session at $2,383 per ounce.

Central Banks in Focus This Week

This week is set to be pivotal for traders, with significant attention on the rate decisions from the Fed, the Bank of Japan (BOJ), and the Bank of England (BOE). The Fed is widely expected to keep rates unchanged, but both the BOJ and the BOE are anticipated to generate considerable market volatility with their decisions and subsequent statements. There is considerable debate regarding whether the BOJ will hike rates or adjust its bond purchasing activities this month, leading to expected movements in the Yen. For the BOE, the market is currently pricing in a 49% chance of a rate cut on Thursday, as high services and core inflation data contend with lower CPI figures and political pressure to reduce rates.

Quiet Trading Day to Kick Off a Massive Week

The first three trading sessions of the week are expected to be quiet, with little macroeconomic data scheduled. Traders anticipate range-bound conditions as the market braces for a potentially pivotal week ahead. While there will be some lower-tier data from the UK early in the European session, it is not expected to significantly impact markets. With a significant amount of data, central bank rate decisions, and other economic updates on the horizon, today is likely to be a calm before the storm as the market prepares for potentially substantial movements later in the week.

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