The U.S. dollar hit one month high yesterday in the wake of China’s central bank unexpectedly cutting interest rates to try and support an economy struggling to recover from its COVID hit. However, following data revealed that U.S. retail sales rose more than anticipated in July, the value of the currency somewhat declined.
Bullions struggled for direction on Monday. Prices had dropped to one a month low following a stronger dollar which sparked after rising U.S. inflation pushed up concerns over higher interest rates.
Base metals plunged drastically on the Comex division as concerns over slowing economic growth in major importer China added to pressure on the red metal. However, in the MCX division prices were able to recover slightly on Monday.
The economy in China continued to weaken last month, according to data released on Tuesday on industrial output and retail sales. This increased pressure on the country’s already sluggish growth and prompted officials to lower key policy rates to boost economic activity.
Crude oil fell nearly one per cent on Monday, while it dropped nearly 2% after sluggish Chinese economic data coupled with fears that Beijing’s unexpected cut in key policy rates was not sufficiently substantial to rejuvenate the country’s sputtering post-pandemic recovery.
Supply cuts by Saudi Arabia and Russia, part of the OPEC+ group comprising the Organization of the Petroleum Exporting Countries (OPEC) and allies, have helped to galvanise a rally in prices over the past seven weeks.
As on 14th August 2023, MCX Gold futures settled at 58974, up 0.12%. After swinging in between gains and losses, Silver prices settled at 69954 almost flat. Copper futures settled at 727.00, up 0.28%. Crude oil prices retreated by 0.95% and settled at 6868. Natural gas gained 0.61% and settled at 232.00.
Economic data released yesterday
Data on U.S. retail sales for July increased more than forecast, which may influence the Fed’s next step. The yearly reading was up 3.17% versus expectations for a gain of 1.5%, while the monthly gain was 0.7% versus expectations of 0.4%.
The People’s Bank of China cut key policy rates for the second time in three months, reducing the rate on its one-year medium-term lending facility by 15 basis points to 2.50% from 2.65%.
Despite an unexpected increase in the UK unemployment rate from 4.0% to 4.2%, money market traders still anticipate a rate increase of at least 25 basis points from the Bank of England next month due to concerns that rapid pay growth will have a domino effect on inflation.
The Japanese economy is starting to show some signs of life, after gross domestic product data showed annualized growth surging to 6% in the second quarter, well above the 3.1% expected.
Economic data and events to watch today
U.K.
At 11.30 am-
CPI y/y. The forecast is 6.7% and the previous was at 7.9%.
Core CPI y/y. The forecast is 6.8% previous was at 6.9%.
PPI Input m/m. The forecast is -0.1% previous was at -1.3%.
PPI Output m/m. The forecast is -0.2% previous was at -0.3%.
At 2.00 pm – HPI y/y. The forecast is 1.8% and the previous was at 1.9%.
All the above data could have a volatile impact on the pound.
Eurozone
At 2.30 pm-
Flash Employment Change q/q. The forecast is 0.4% and the previous was at 0.6 %.
Flash GDP q/q. The forecast is 0.3% previous was at 0.3%.
Industrial Production m/m. The forecast is -0.1% previous was at 0.2%.
Above data could have a negative impact on the Euro.
Canada
At 5.45 pm- Housing Starts. The forecast is 245k and the previous was at 281k.
At 6.00 pm – Wholesale Sales m/m. The forecast is -4.2% previous was at 3.5%.
Above data could have a negative impact on the dollar.
U.S
At 6.00 pm- Building Permits. The forecast is 1.47M previous was at 1.44M.
At 6.00 pm – Housing Starts. The forecast is 1.45M previous was at 1.43M.
At 6.45 pm – Industrial Production m/m. The forecast is 0.3% previous was at -0.5%.
At 8.00 pm – Crude Oil Inventories. Data is foreseen at -2.8M previous was at 5.9M.
At 11.3pm – FOMC Meeting Minutes. The market will react strongly to comments.
Above data could have a volatile impact on the dollar.