Because a bigger confrontation may engulf Iran and lead to a multi-front war in the area, which might jeopardize energy supply, crude oil prices might continue to be supported.
With US consumer confidence exceeding expectations and declining inflation, markets concluded the first half of 2024 with volatility in the last June session.
The Japanese yen's decline to almost 161 per dollar helped the dollar to a two-month high of 106.13, its strongest level since 1986. Atsushi Mimura, who succeeded Masato Kanda as Japan's top currency ambassador, was named by the Ministry of Finance. In the first US presidential debate, markets also gave former president Donald Trump a huge advantage. The dollar was also strengthened by aggressive remarks made by Fed officials and a reaffirmation of the wait and watch strategy. The statistics indicated that inflation eased in May for a second straight month, after a hotter-than-expected first quarter, although the dollar fell from its two-month high of 106.13.
COMEX Gold futures were expected to conclude the week (which ended on June 28) higher due to increased geopolitical tensions and a lowering of a key US inflation measure. Gold, meanwhile, lost ground as the dollar hardly declined, even though US statistics pointed to slower inflation and GDP. The US economy grew at an annual rate of 1.4 percent in the first quarter, which was slightly better than the previous estimate of 1.3 percent. Meanwhile, continuing claims, a proxy for the number of people receiving benefits, rose to 1.84 million in the week ending June 15. This was the slowest quarterly growth since spring 2022.
While Israel is stepping up preparations for the invasion of southern Lebanon to curtail Hezbollah's activities, tensions between Israel and Lebanon's Hezbollah have escalated in northern Israel in recent weeks, causing WTI Crude to extend gains for the third week in a row and soar to a two-month high of $82.72 a barrel. Because a bigger confrontation may engulf Iran and lead to a multi-front war in the area, which might jeopardize energy supply, crude oil prices might continue to be supported.
On the daily chart, the MCX Crude Oil July futures broke out of a consolidation on Friday that had been forming for over a week, but it was hard to hold because the price closed inside the consolidation. The fact that the price is still above the Supertrend (7,3) and the 20SMA (Simple Moving Average) indicates that the short-term bullish trend is still in effect. Price may gain upward momentum and test the Rs 7,000 barrier in the next week if it breaks and stays above Friday's high of Rs 6,899 per barrel. On the other hand, if the price breaks through the consolidation support of Rs 6,700, it might fall as low as Rs 6,570. We expect sideways to positive price action in the following week.
The relaxation of Beijing's home-buying regulations helped LME base metals, although copper was the only member of the group that lost money because of the country's uncertain demand outlook, which was shown by the negative Yangshan import premium, high copper exports, and increased stockpiles.
As anticipated, the headline PCE (Personal Consumption Expenditures) climbed by 0.1 percent MoM in May, while the US core PCE inflation rate increased at a slower rate. After climbing 2.8 percent in April, core inflation grew 2.6 percent year over year in May, the lowest growth since March 2021. This raised optimism that Fed officials would become more confident that inflation is "sustainably" approaching the 2 percent target set by the central bank.
Now that the much anticipated PCE statistics have failed to materially shift expectations for a rate decrease, investors are looking to future US jobs data and remarks from Fed Chair Jerome Powell to provide more clarity on the direction of policy.
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