Australian Exchange Forex July 18 Financial Breakfast: The dollar's decline has slowed, and traders are skeptical about whether the Federal Reserve can soon suspend interest rate hikes

On July 18, the dollar fell against a basket of currencies on Monday. Last week, it recorded its largest weekly decline this year due to the decline in U.S. Treasury yields, but it remained above the more than one-year low hit on Friday. There was a lack of a major catalyst to move the market. Gold prices did not change much, and gold traders remained skeptical about whether the Federal Reserve might soon signal an end to monetary tightening.

Beijing time on Tuesday (July 18), the dollar fell against a basket of currencies on Monday, last week due to the decline in U.S. Treasury yields and the largest weekly decline this year, but still remain above the more than one-year low hit last Friday, the lack of a major catalyst to drive the market direction, gold prices little change, gold traders are still skeptical about whether the Federal Reserve may soon send a signal to end monetary tightening.

Commodity closing situation:US gold futures fell 0.4 per cent to settle at $1,956.40, while Brent crude futures fell 1.7 per cent to $78.50 a barrel and US crude futures fell 1.7 per cent to $74.15.

US stock market closing:The Dow Jones index closed up 0.22% at 34,585.22; the S & P 500 index closed up 0.36% at 4,521.55; the Nasdaq Composite index closed up 0.93% at 14,244.95.

Tuesday Forward

Precious metal

Gold prices were little changed on Monday as traders remained sceptical about whether the Federal Reserve might soon signal an end to monetary tightening. The dollar was hovering near more than a year's low, said Bart Melek, head of commodity strategy at TD Securities. "Despite last week's good inflation data, [gold] investors are still reluctant to be broadly bullish right now."

Gold prices posted their biggest weekly gain since April last week amid bets that the Federal Reserve could pause interest rate hikes beyond July after US data hinted at a slowdown in inflation, with consumer prices rising at their slowest pace in more than two years. Traders widely expect the Fed to raise rates at its July 25-26 meeting.

Mr. Melek added: "The US economy continues to be strong, especially on employment, and gold could come under pressure. In my view, the Fed is unlikely to commit to a more dovish policy stance."

Silver fell 0.5 per cent to $24.82 an ounce, platinum rose 0.6 per cent to $977.42 and palladium rose 1.2 per cent to $1,286.13.

crude oil

Crude oil prices fell by more than 1.5% on Monday, amid doubts about strong demand and a partial restart of Libyan production, which also weighed on oil prices.

Crude oil also came under pressure on Monday when production resumed at two of Libya's three oil fields closed last week in protest at the kidnapping of its former finance minister.

Meanwhile, oil exports from Russia's western ports will fall by 10-200,000 bpd next month, two sources said on Friday, a sign that Moscow is following through on its pledge to cut production in tandem with Saudi Arabia.

Data released by the U.S. Energy Information Administration (EIA) on Monday showed that U.S. shale oil production will also fall to nearly 9.40 million barrels per day in August, which would be the first monthly decline since December 2022.

foreign exchange

The dollar fell against a basket of currencies on Monday, posting its biggest weekly drop this year last week as U.S. Treasury yields fell, but remained above the more than one-year low hit on Friday, lacking a major catalyst to move the market.

The dollar is likely to consolidate this week as investors await the Federal Reserve's meeting next week, when it is expected to raise interest rates by another 25 basis points. Marc Chandler, chief market strategist at Bannockburn Global Forex, said the pace of the dollar's decline last week "seems unusually large", noting that markets should stabilize and see the dollar climb this week.

The main focus of the U.S. economy this week is the June retail sales report due out on Tuesday, although the data is unlikely to sway the direction of monetary policy.

Fed funds futures traders expect the Fed to raise interest rates by another 32 basis points, with the benchmark peaking at 5.40 per cent in November. That means markets see little chance of further rate rises after the July 25-26 meeting.

Last week's sharp decline in U.S. Treasury yields and a slowdown in U.S. consumer and producer price inflation in June have raised expectations that price pressures will continue to ease, driving monetary policy more dovishly.

Francesco Pesole, currency strategist at ING, said: "The shock of the US inflation slowdown last week has changedforeign exchange marketBut in the days without key data, we will know whether this shock can keep the dollar down as the FOMC risk event approaches. "

He added that "the euro/dollar rally looks excessive in the short term and could face a correction this week."

The dollar index ended the session down 0.12 percent at 99.832, having touched 99.574 on Friday, its lowest since April 2022. The euro rose 0.14 percent to $1.1242, having earlier hit its highest since February 2022 at $1.12445.

The Bundesbank said on Monday that Germany, the eurozone's largest economy, could contract by more than 0.3 percent this year than expected a few weeks ago, despite a modest rebound in the second quarter.

Germany, an industrial powerhouse, has borne the brunt of falling global demand for goods, as rising borrowing costs discourage investment and people spend more on leisure, travel and other services in the wake of the pandemic.

The international monetary fund (IMF) said on Monday that Germany's economic output may contract slightly this year due to energy price shocks and tightening financial conditions. The European Central Bank is expected to raise interest rates by 25 basis points next week.

The dollar fell 0.07 percent to 138.65 against the yen, after touching 137.245 yen on Friday, its lowest since May 17. Sterling fell 0.06 percent to $1.3082, and touched $1.31440 on Thursday, its highest since April 2022.

Market News

Russia will cut its oil exports in August as planned

According to the Russian newspaper Kommersant, Russia is moving towards realizing its plan to reduce oil exports by 500,000 bpd in August. Russia's August offshore oil exports are likely to fall to 290-3 million bpd, mainly due to lower exports from Russian Baltic ports. The cuts were made by adjusting the third-quarter export schedule of state-owned pipeline operator Transneft, two sources said. Russia announced its production cut plan earlier this month in hopes of boosting global oil prices along with Saudi Arabia.

The US Treasury Secretary: The US labor market is on a good track

Treasury Secretary Janet Yellen said the US labour market has been strong and in fact the strength of the labour market has encouraged more people of prime working age to enter the labour market to work, which has helped to ease the heat in the labour market. In general, slower growth is normal, but it has also led to less willingness by companies to hire. Wage growth is moderating and inflation is weakening despite many open positions. So in the US I think we are on a good track.

Goldman Sachs cuts the probability of a U.S. recession in the next 12 months to 20%.

Jan Hatzius, an economist at Goldman Sachs, has cut the probability of a US recession to 20 per cent from the previous 25 per cent. "Both recent data and continuing fundamentals suggest that inflation will decline rapidly from now on, with little impact on the economy," he said. In March, Goldman Sachs raised the probability of a US recession to 35 per cent and said the Federal Reserve would not raise rates at its March meeting, but eventually the Fed raised rates and the banking crisis quickly subsided. In June, they cut the probability to 25 per cent, saying "banking sector stress will only be a modest drag of 0.4 percentage points on real GDP growth this year as regional bank share prices have stabilised, deposit outflows have slowed, lending volumes have remained stable and lending surveys suggest limited tightening ahead. The tail risk of a damaging debt ceiling battle has also disappeared. "Goldman Sachs economists expect the Federal Reserve to raise interest rates by 25 basis points at its July meeting, with peak rates in the 5.25-5% range, after which it will pause for a year and then gradually cut rates.

ECB Governing Council Nagel: Interest rates are expected to rise in July, but decisions will be made in September based on data

Mr. Nagel, the ECB's governing council member, said the central bank would have to raise interest rates again this month and would make a decision based on the data at its next meeting. "I expect a further 25 basis points at the July meeting and for the September meeting we will see what the data tell us." Underlying inflation was very sticky, he said. While markets and economists believe the ECB will raise rates next week and in September, central bankers are not clear on the path of rate rises beyond the summer. Some committee members, including Mr. Nagel himself, said another rate rise should not be ruled out. Others were concerned about the outlook for the 20-nation eurozone economy. Mr. Nagel saw no risk of excessive tightening and reiterated that a hard landing in Europe was unlikely as interest rates rose, but said it was too early to declare victory in the fight against inflation.

Deloitte survey: UK corporate CFO confidence index turns from positive to negative, with high inflation and high interest rates becoming core challenges

Corporate CFOs in the UK are becoming increasingly pessimistic about the outlook for their businesses against the backdrop of inflationary pressures and rising interest rate expectations, a survey has shown. The latest quarterly survey of 69 CFOs by Deloitte showed the CFO confidence index fell from 25% in Quarter 1 to -10% in the second quarter. Tight monetary policy has replaced geopolitical concerns and energy prices as CFOs' top concerns. Ian Stewart, chief economist at Deloitte, said, "Businesses have experienced a number of significant challenges over the past four years, including Brexit, epidemics and supply shortages. The hangover from these early shocks, namely inflation and high interest rates, is now the core challenge."