Welcome to the Topaz Global Weekly Market Outlook for August 26, 2024. This week’s Weekly Market Outlook provides comprehensive insights into the financial markets, covering key developments across North America, Europe, Asia, and Oceania. Our Weekly Market Outlook is designed to offer valuable information to traders and investors, helping them make informed decisions based on the latest trends and market analysis.
Summary of Weekly Market Outlook
Fed’s Potential Rate Cut in September
The Federal Reserve (Fed) hinted at a potential rate cut in September during the Jackson Hole symposium. This announcement has sparked market optimism, leading to a rally in global equities, a weakening of the US dollar, and a drop in Treasury yields. The Fed’s decision will likely hinge on incoming economic data, particularly labor market indicators.
Eurozone’s Inflation Outlook
In Europe, the Eurozone’s preliminary August Consumer Price Index (CPI) is expected to decline, potentially prompting the European Central Bank (ECB) to consider a rate cut in September. This development could halt the recent rally in the euro, making it a key focus for traders this week.
Bank of Japan’s Stance
In Asia, the Bank of Japan (BoJ) continues to navigate a challenging economic environment. While recent data shows signs of improvement, the BoJ remains cautious about normalizing its monetary policy, with inflation still above its 2% target.
Commodities and Cryptocurrencies
Gold prices have benefited from the Fed’s dovish stance, while oil prices remain under pressure due to weak global demand. Bitcoin and other cryptocurrencies show potential for further gains as stablecoin balances on exchanges increase.
Weekly Market Outlook Highlights
North America
Last week’s market movements were heavily influenced by the Fed’s communication regarding potential policy easing. The July Federal Open Market Committee (FOMC) minutes indicated that a policy easing at the next meeting might be appropriate if data aligns with expectations. Fed Chair Jerome Powell’s remarks at the Jackson Hole symposium confirmed an interest rate cut in September, leading to increased market expectations for a 0.50% rate cut.
The US labor market remains a key focus, with Initial Jobless Claims rising to 232k, signaling a slight softening. Conversely, the Preliminary August Service PMI rose to 55.2, exceeding estimates but not expected to alter the Fed’s planned rate cut.
Outlook:
•Fed’s Rate Cut: The Fed’s potential rate cut could support gold prices and weaken the US dollar.
•Labor Market: Continued monitoring of jobless claims and other labor market indicators is crucial.
Europe (UK, EU, CH)
In Europe, the Eurozone’s inflation outlook remains a key focus. The preliminary August CPI is expected to decline to 2.2% YoY from 2.6%, which may prompt the ECB to consider a rate cut in September. This potential rate cut could halt the euro’s recent rally, making it a critical factor for traders.
The UK economy showed resilience, with Consumer Confidence reaching its highest level in nearly three years in August 2024. Additionally, UK PMI data indicated economic growth, reducing pressure on the Bank of England (BoE) to cut interest rates in the near term.
Outlook:
•ECB’s Rate Cut: The Eurozone’s inflation data will be closely watched, with potential implications for the ECB’s policy decisions.
•UK Economic Growth: Continued economic growth in the UK could support the pound.
(H3) Asia and Oceania
Japan’s economic landscape shows mixed but generally positive signs. Exports rose 10.3% YoY in July, driven by the yen’s weakness. However, inflation remains above the BoJ’s 2% target, keeping the central bank cautious about normalizing its monetary policy.
China’s economic outlook remains cautiously optimistic, despite challenges in industrial production and exports. The People’s Bank of China (PBoC) has maintained its key lending rates, signaling a measured stance in its monetary policy.
Outlook:
•BoJ’s Policy: The BoJ’s cautious approach to policy normalization could lead to gradual yen strengthening.
•China’s Economy: The PBoC’s balanced approach to monetary policy could support China’s economic growth.
Fundamental Analysis
Metals: Gold and Other Metals
Gold prices have benefited from the Fed’s dovish stance, rising to 2,500 USD per troy ounce. The Fed’s potential rate cut in September could further support gold prices, making it a key asset to watch.
Outlook:
•Gold Prices: Continued upward momentum is expected, with potential profit-taking in the short term.
Energies: Oil and Natural Gas
Oil prices rose over 2% last week after the Fed hinted at potential rate cuts. However, weak global demand and concerns over China’s economy have kept oil prices under pressure. Natural gas prices faced volatility, ending the week with a 4.76% loss.
Outlook:
•Oil Prices: Oil prices may remain range-bound, with potential gains if demand improves.
•Natural Gas: Prices may face challenges in gaining upward momentum due to strong storage levels.
Cryptocurrencies: Bitcoin and Other Cryptos
Bitcoin prices have shown potential for further gains, supported by an increase in stablecoin balances on exchanges. The lack of significant selling pressure suggests that Bitcoin prices could continue to rise in the near term.
Outlook:
•Bitcoin: Prices may continue to rise, with key resistance levels to watch.
Technical Analysis
US Dollar Index (DXY)
The US Dollar Index (DXY) fell sharply last week, breaking key support levels. The Fed’s potential rate cuts could lead to further weakness in the dollar, making it a critical factor for currency traders.
Outlook:
•DXY: Continued bearish momentum is expected, with potential support around 97.67.
Gold (XAUUSD)
Gold prices closed higher last week, supported by the Fed’s dovish stance. The continuation of the bullish primary trend suggests further gains in the near term.
Outlook:
•Gold: Prices may test the 2,530 USD resistance level, with potential for further gains.
EURUSD
The EURUSD pair reached a one-year high last week, driven by strong bullish momentum. The pair may continue to rise, with key resistance levels to watch.
Outlook:
•EURUSD: Prices may test the 1.1245 resistance level, with potential for further gains.
Economic Calendar for the Week
The economic calendar for the week includes key events such as the German Ifo Business Climate Index, US Durable Goods Orders, and the Eurozone CPI. These events will provide critical insights into the global economic outlook and could influence market movements.
Key Events to Watch:
•German Ifo Business Climate Index: Insights into the German economy.
•US Durable Goods Orders: A key indicator of US economic activity.
•Eurozone CPI: A critical factor for ECB policy decisions.
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This week’s market outlook offers a comprehensive overview of the key developments in the global financial markets. With the Fed’s potential rate cuts, the Eurozone’s inflation outlook, and ongoing challenges in Asia, the coming days promise to be eventful for traders. Stay tuned to Topaz Global for the latest insights and analysis.
