Today's Global Economic Outlook

Market Overview

The time has come for policy to adjust, Powell said in a highly anticipated speech at the Kansas City Fed's annual economic conference in Jackson Hole, Wyoming.

Powell's comments added certainty to the already broad expectations for a rate cut at the Fed's September policy meeting.

“This morning's speech definitely used the strongest language yet, indicating that interest rates are very likely to be reduced in September, with the key question being whether the cut will be 25 or 50 basis points,” said Stephen Kolano, Chief Investment Officer at Integrated Partners.

The market has now turned positive on the likelihood of a rate cut this coming September, with traders eager to start selling the Dollar, anticipating its impending weakness. We expect to see the Dollar weaken in the coming months until the market gains more confidence in its strength. With that said, we are heavily selling the Dollar.

On the other hand, the CB Consumer Confidence report, set to release later today, will provide a clearer picture of the current market sentiment. Preliminary GDP data and Unemployment claims are scheduled for release this Thursday, followed by the Core PCE Price Index on Friday. These data points will further influence the magnitude of the expected rate cut in September.

Additionally, the AUD CPI y/y may shape market expectations regarding RBA rate cuts. The Eurozone is also set to release key data, including Germany's Preliminary CPI m/m and CPI Flash estimate, which will provide further insights into Euro strength.

The Loonies GDP m/m will also offer guidance on market expectations for BoC rate cuts.

In light of this, U.S. Treasury Yields have fallen sharply to 3.801%, nearing the lowest point reached last week. This drop indicates increased demand for bonds as risk-on assets lose appeal due to ongoing uncertainty surrounding U.S. elections, Asian tensions, and the potential for conflict in the Middle East.

Oil prices have also risen, as previously discussed, with Brent Crude Oil at $79.01 and Light Crude Oil at $74.96 per barrel. This increase will boost the Loonie's value and may encourage further buying of the currency. This shift in the Loonie's strength is reflected in the COT reports, showing Non-Commercials exiting short positions by 16,341 contracts and Commercials increasing their short positions by 6,944 contracts.

GOLD -GOLD has risen close to its previous highest levels before the end of the week. We expect further buying in GOLD as Powells comments have spurred selling of the Dollar and increased the transition to safer alternatives like bonds and metals. This should make it easier for the GOLD market to gain strength and momentum as we approach September. This week may be the last of consolidation, as larger investors could push prices lower to buy at better levels before the rate cuts. However, the possibility of breaking the previous high remains.

SILVER - SILVER is trading near 29.900, the final resistance point before potentially climbing to new highs. SILVER is expected to gain momentum as we move into the new month, driven not only by the upcoming rate cut expectations but also by rising war tensions. Therefore, we anticipate further upward movement in this market.

DXY -Rate cut bets now focus on the magnitude of the cut—whether it will be 25 or 50 basis points—rather than the timing. We see prices dropping significantly toward 100.443 and anticipate a break below this level.

GBPUSD - The Pound has risen significantly, as expected, and we foresee this trend continuing. However, Bank of England Governor Andrew Bailey has suggested that more interest rate cuts might be on the way to help mortgage holders, noting that inflation is decreasing faster than anticipated. He mentioned that, although inflation is becoming less of a concern, the Bank must remain cautious until inflation targets are consistently met, following last month's rate cut from 5.25% to 5%.

AUDUSD -RBA expectations will be clearer after this weeks CPI data release for the Aussie Dollar. Until then, we anticipate further strength in the market, with more buying interest likely to push prices above 0.67985.

NZDUSD - The Kiwi has now risen above 0.62086, and we expect it to climb further as market expectations for rate cuts continue. The Kiwi's strength is bolstered by positive economic outlooks for New Zealand. While short-term declines may occur during rate cuts, as the RBNZ has signaled further cuts this year and next, we expect the currency's overall strength to persist unless unforeseen factors pressure policy changes.

EURUSD -The Euro has maintained its bullish momentum, surpassing 1.11386 and its previous high before the week ended. We expect a minor pullback before continued growth. However, an escalation of conflict in the Middle East could alter this trajectory.

USDJPY -The Yen has gained significantly against the Dollar, despite the overall weakness in Japan's economy, as reflected in the charts. The BoJ is carefully navigating these uncertain waters with their sudden rate hikes. While Yen weakness against other pairs is possible, we also expect it to strengthen depending on the government's confidence. Speculation about a major market event continues to disrupt expectations, as such an event could dramatically shift market sentiment and economic conditions.

USDCHF -The Franc's strength remains steady and consistent, making it a safer alternative compared to other currencies, due to Switzerland's stable and strong economy. Notably, Switzerland was the first to begin cutting rates, a move that has proven beneficial for their currency. Traders are now more inclined to trade the Franc with reduced expectations of further rate cuts, despite the SNB suggesting the possibility of additional cuts. Consequently, we expect this market to continue its downward trend.

USDCAD -The Loonie has gained considerable strength, the most among its peers, due to the recent surge in oil prices. This is also driven by the breakdown of diplomatic efforts to calm tensions with Iran and Hamas. An attack appears imminent, and we are now only waiting to see its timing and severity. We continue to anticipate further strength in the CAD.

COT Report Analysis

CAD - WEAK (1/5)

CHF - WEAK (5/5)

GBP - STRONG (5/5)

JPY - STRONG (5/5)

EUR - STRONG (5/5)

AUD - STRONG (1/5)

NZD - WEAK (3/5)

USD - STRONG (5/5)

SILVER - STRONG (5/5)

GOLD - STRONG (5/5)