Here are the changes among key dollar pairs on the week as we look to the final day of US trading later:

• EUR/USD: -0.1%
• USD/JPY: +0.9%
• GBP/USD: -0.2%
• USD/CHF: +0.3%
• USD/CAD: -0.3%
• AUD/USD: +0.6%
• NZD/USD: -0.2%

Outside of the Japanese yen and perhaps arguably the aussie, the changes on the week are rather insignificant thus far. The mid-week break also didn’t really help in lifting the appetite in markets.

The move higher in USD/JPY owes much to a few reasons, as Adam outlined here. Meanwhile, the aussie is slightly higher after the RBA left the cash rate unchanged at 4.35% on Tuesday. But the central bank did say that they discussed rate hikes at this week’s meeting, so that is helping to put a floor on the currency.

Besides that, the franc is a touch lower after the SNB decided to cut interest rates further. The currency had been enjoying a stellar June up until then, helped by political woes in Europe as well as of late.

Overall, the changes we’re seeing point to a steadier dollar despite US equities keeping its run higher. Instead, the dollar seems to be taking its cue from the bond market. 10-year Treasury yields are also seeing a bit of a back and forth week, seen up just 1.1 bps at 4.234% currently.

This article was written by Justin Low at www.forexlive.com.

• The responsibility lies entirely with the EU side
• Hopes that EU would meet China halfway and handle differences through dialogue

For some context, the EU launched five new anti-dumping investigations against China in May. That was seen totaling to roughly $1.71 billion. And they are following that up with proposed tariffs on Chinese electric cars. If China were to retaliate, the likes of Germany would be the most at risk given their exposure to trade with China.

This article was written by Justin Low at www.forexlive.com.

• Prior 52.9
• Manufacturing PMI 51.4 vs 51.3 expected
• Prior 51.2
• Composite PMI 51.7 vs 53.1 expected
• Prior 53.0

Election jitters starting to creep in? The headline reading is a 7-month low and that is weighing on the overall UK business activity for June. The only bright side is that manufacturing conditions are seen improving further, with the reading there being a 23-month high. Going back to services activity, S&P Global notes that there is some evidence that the
slowdown was partly driven by a pause in client spending
decisions ahead of the election period.

“Flash PMI survey data for June signal a slowing in the
pace of economic growth, indicating that GDP is now
growing at a sluggish quarterly rate of just over 0.1%.

“The slowdown in part reflects uncertainty around the
business environment in the lead up to the general
election, with many firms seeing a hiatus in decision
making pending clarity on various policies.

“Meanwhile, from an inflation perspective, stubbornly
persistent service sector inflation – a major barrier to lower
interest rates – remains evident in the survey, but should
at least cool further from the current 5.7% pace in coming
months. However, companies‘ costs are rising, most
notably in manufacturing, where shipping costs in
particular are spiking again and adding to a renewed rise
in inflationary pressures from goods.

“In short, while a slowdown in economic growth may prove
temporary, should businesses react positively to the
policies announced by any new government, the
stubbornness of underlying inflationary pressures above
the Bank of England’s target still looks somewhat
engrained.”

This article was written by Justin Low at www.forexlive.com.

Headlines:

• BOE leaves bank rate unchanged at 5.25%, as expected
• August back in the picture for the BOE?
• SNB cuts key policy rate by 25 bps to 1.25% from 1.50% previously
• SNB chairman Jordan: FX intervention can be in both directions
• Swiss franc falls as SNB continues with rate cuts
• ECB’s Knot: Optimal policy path is broadly in line with just under three rate cuts in 2024
• Japan top currency diplomat says there is no limit to FX intervention resources
• Germany May PPI 0.0% vs +0.3% m/m expected
• Switzerland May trade balance CHF 5.81 billion vs CHF 4.32 billion prior

Markets:

• AUD leads, CHF lags on the day
• European equities higher; S&P 500 futures up 0.4%
• US 10-year yields up 2.7 bps to 4.243%
• Gold up 0.5% to $2,340.17
• WTI crude up 0.1% to $81.70
• Bitcoin up 2.3% to $66,327

Central banks were in the spotlight in European trading today and they at least kept things interesting despite the decisions being as „expected“.

The SNB was the first up to bat and they decided to cut interest rates once again. The Swiss franc slipped in the aftermath though, with market expectations arguably leaning closer towards a 50-50 rather than a done deal.

But adding to that, SNB chairman Jordan was explicit in outlining that the franc has „significantly appreciated“ in the past weeks. He also steered clear of mentioning what he did in May, that being „a weaker franc is the main source of inflation“. That suggests the central bank is comfortable with present levels in the currency.

USD/CHF jumped from around 0.8840 to 0.8900 and is holding thereabouts now.

Then, we had the BOE decision which played out more or less as expected. However, the central bank dropped a couple of subtle dovish hints which might potentially draw an August rate cut back into the picture. I still think the bar for that is extremely high but there will be plenty of watchful eyes on the next UK CPI report on 17 July in any case.

The pound fell amid those considerations, with GBP/USD easing from 1.2705 to 1.2680 levels currently.

Looking to FX as a whole, the dollar continues to keep steadier on the week. EUR/USD is down 0.2% to 1.0720 while USD/JPY continues to creep higher in a push from 158.00 to 158.40 on the day.

In other markets, equities continue to keep up some optimism on the week awaiting the return of US markets later. European indices saw a bit of a setback yesterday but are seen bouncing back today.

This article was written by Justin Low at www.forexlive.com.

There were a couple of dovish hints, subtle of course, put out by the BOE in their rate statement today. Let’s dive straight into it.

Firstly, they introduced this passage to the forward guidance:

„As part of the August forecast round, members of the Committee will consider all of the information available and how this affects the assessment that the risks from inflation persistence are receding.“

Secondly, there are some policymakers looking to already dismiss the ever so stubborn services inflation. The minutes revealed the following:

„The upside news in services price inflation relative to the May Report did not alter significantly the disinflationary trajectory that the economy was on. This view was supported by evidence that the recent strength in services inflation included regulated and indexed components of the basket, and volatile components. Such factors would not push up medium-term inflation.“

And perhaps more importantly, the BOE says that the decision today was „finely balanced“ for some policymakers given the above. The BBC is reporting this applies to three members, which voted for holding rates instead. If you put them on the same side with Dhingra and Ramsden, we might be staring at a 2-0-5 vote in favour of cutting rates in the near future.

In terms of BOE pricing, not much has changed though. The odds for an August rate cut were ~34% coming into the meeting and they are ~43% now. As for total rate cuts this year, traders are now seeing ~49 bps worth of rate cuts as opposed to ~45 bps before.

Well, mark your calendars. The next UK CPI report on 17 July is going to be a big one in determining whether August comes into play.

This article was written by Justin Low at www.forexlive.com.

The excitement around artificial intelligence is beginning
to resemble the California gold rush; only now are companies, not individuals,
chasing the new El Dorado. Representatives of all industries seem determined to
incorporate the latest technology into their operations to increase
productivity and reduce costs.

Merchants find themselves in a situation similar to that of
150 years ago: everything is going well. However, now the winners are not the
sellers of shovels, cowboys, tents, etc., but the chip vendors. NVIDIA stock has conquered the top of Olympus and, like
„Envidia“ in Spanish, has become the envy of many competitors.

It has surpassed Microsoft in market capitalization for the
first time, making it the world’s most valuable company. Notably, it took
NVIDIA 24 years to reach a market capitalization of $1 trillion, 180 trading
days to double to $2 trillion, and only 66 more to reach $3 trillion. At this
rate, the company could soon surpass the $4 trillion mark….

Keep in mind that NVIDIA’s current market capitalization is
$3.3 trillion, and revenue was $61 billion last year. Expected P/E is 27.6x,
and P/E is 49.6x. From this perspective, earnings per share (EPS) will take
about 49.6 years to equal its price to the current P/E. Thus, betting on the
stock is not very cheap. In contrast, the S&P 500 index is 21 times
earnings.

The Wall Street Journal notes that the last time a major IT
infrastructure vendor topped the list of most valuable U.S. companies was in
March 2000, suggesting parallels with the dot-com crisis. However, analysts
believe this time will be different, calling NVIDIA’s revolutionary chips the
century’s most important invention.

The only thing is that while some $50 billion has been
invested in Nvidia’s chips since the boom began, generative AI startups have
only brought in $3 billion in sales. So it will be a while before the extremely
optimistic expectations materialize on paper or, rather, on the companies‘
balance sheets.

As for what to expect next, as long as the stock market is
bullish and optimistic about the future, the AI bonanza and love for tech
stocks, especially the leading ones, may persist. However, the riskiest and
most expensive stocks could undergo a significant correction once the mood
changes. The question is not if it will happen but when.

To determine the latter, it is advisable to monitor macroeconomic indicators, as they indicate the
general state of the economy, forecast future consumer demand, etc. On the one
hand, a fall in the exchange rate may force the Fed to lower interest rates,
but on the other hand, demand for specific goods and services may fall.

This article was written by FL Contributors at www.forexlive.com.

• Prior 5.25%
• Bank rate vote 7-0-2 vs 7-0-2 expected (Dhingra, Ramsden voted to cut by 25 bps)
• For some policymakers, decision today was „finely balanced“
• That is because higher-than-expected services inflation reflected factors that would not push up medium-term inflation
• Labour market continues to loosen but remains relatively tight by historical standards
• Key indicators of inflation persistence continue to moderate, but remain elevated
• Need to be sure inflation will stay low before cutting rates
• Monetary policy will need to remain restrictive for sufficiently long to return inflation to target
• BOE remains prepared to adjust monetary policy as warranted by economic data to return inflation to the 2% target sustainably
• Will continue to monitor closely indications of persistent inflationary pressures and resilience in the economy as a whole
• Full statement

The decision is as what you’d expect but there are some subtle dovish hints embedded in the statement. In the forward guidance paragraph, the BOE added this passage:

„As part of the August forecast round, members of the Committee will consider all of the information available and how this affects the assessment that the risks from inflation persistence are receding.“

It points to the notion that they are perhaps looking to tee up a rate cut come August, should the data continue on its current trajectory.

Besides that, the other standout point to me is that they are already finding excuses to dismiss the stubbornly high services inflation. In the statement, it is mentioned that:

„The upside news in services price inflation relative to the May Report did not alter significantly the disinflationary trajectory that the economy was on. This view was supported by evidence that the recent strength in services inflation included regulated and indexed components of the basket, and volatile components. Such factors would not push up medium-term inflation. For these members, the policy decision at this meeting was finely balanced.“

The fact that the decision was more „finely balanced“ means that policymakers are putting a lot of thought in considering the next step i.e. rate cuts already.

GBP/USD is down slightly after the decision here, with the pair down from around 1.2705 to 1.2690 currently.

This article was written by Justin Low at www.forexlive.com.

Fundamental
Overview

The USD has been generally
weaker this week after the strength seen last week due to some risk off
sentiment. In fact, it looks like it’s just sentiment that’s been driving the
market recently as fundamentally the soft US inflation figures just consolidated the market’s
expectation of two cuts for this year despite a bit more hawkish than expected FOMC decision.

The NZD, on the other hand,
got pressured mainly because of the risk-off sentiment and the US Dollar
strength. The mood in the market has been gradually improving this week and we
saw the Kiwi gaining ground as a consequence.

We also had some good news
for New Zealand today as the Q1
GDP showed positive growth and took the economy out of the technical recession.
GDP is generally not a strong market moving catalyst because it’s old news but
nonetheless that confirms a pickup in growth in the first part of the year.

NZDUSD
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that NZDUSD bounced near the key support
around the 0.6082 level where we have also the 38.2% Fibonacci retracement level for confluence.

The buyers stepped in
around the bottom of the range and they are now targeting a rally back into the
0.6217 resistance. That’s where we can expect the sellers piling in again with
a defined risk above the resistance to position for a drop back into the bottom
of the range.

NZDUSD Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see that the price action has been mostly rangebound between the 0.6082 support
and the 0.6217 resistance. These will be the key levels that the market will need
to break to start a more sustained trend. For now, we could keep bouncing
around as the market awaits new catalysts.

NZDUSD Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can
see that we have a strong resistance zone around the 0.6145 level where the
price got rejected from several times in the past days.

The buyers will want to see
the price breaking higher to gain more conviction and increase the bullish bets
into the 0.6217 level. The sellers, on the other hand, will likely keep on
leaning on that resistance to position for a drop back into the 0.6082 support.
The red lines define the average
daily range for today.

Upcoming
Catalysts

Today we have the US Housing Starts, Building Permits and the US Jobless
Claims figures. Tomorrow, we conclude the week with the US PMIs.

This article was written by Giuseppe Dellamotta at www.forexlive.com.

Fundamental
Overview

Copper has been rallying like crazy in the first part of the year amid a
pickup in global growth, Chinese stimulus measures and concerns over tightness
in global mine supply. Unfortunately, as it’s often the case, the rally
attracted the momentum players, the price got overstretched and we got a big
correction to the downside.

FT reported that stocks in Shanghai warehouses reached the highest level
since 2020 amid tepid demand because of the China’s real estate sector
downturn. Given the high prices reached in the last month, manufacturers held
off from buying as they had an incentive to run down their stockpiles.

FT also added that Chinese copper fabricators have very
recently started buying the metal again, with inventories recording slight
decreases in the past two weeks. All else being equal, if we keep seeing positive growth and maintain the risk-on
sentiment, we could see new highs in the months ahead with the Chinese
officials increasing the policy support if the data was to show some
deceleration.

Copper
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that copper has been experiencing an aggressive correction to the downside
after setting a new all-time high. The price bounced recently on a key level at
4.35 where we can also find the 50% Fibonacci retracement level for confluence.

This is where we can expect
the buyers to step in with a defined risk below the level to position for a
rally into a new all-time high. The sellers, on the other hand, will want to
see the price breaking lower to increase the bearish bets into the 4.00 level.

Copper Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see that we have a trendline defining the current bearish trend.
The buyers will want to see the price breaking higher to gain some more
conviction and extend the rally into the 4.67 level where we have also the
38.2% Fibonacci retracement level of the entire correction. If the price gets
there, we can expect the sellers to lean on that level to position for a break
below the 4.35 support with a better risk to reward setup.

Copper Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can
see that the price is rejecting the trendline as the sellers are stepping in
with a defined risk above it to position for a drop back into the support
targeting a break below it. The red lines define the average daily range for today.

Upcoming
Catalysts

Tomorrow we get the US Housing Starts, Building Permits and the latest US
Jobless Claims figures. On Friday, we conclude the week with the US PMIs.

This article was written by Giuseppe Dellamotta at www.forexlive.com.

• Prior +15.6%
• Market index 210.4 vs 208.5 prior
• Purchase index 146.0 vs 143.7 prior
• Refinance index 552.7 vs 554.7 prior
• 30-year mortgage rate 6.94% vs 7.02% prior

Mortgage applications nudged a little higher in the past week, helped by a further jump in purchase activity. That is offset by a decline in refinancing activity, following the surge higher in that space in the week before. Here’s the trend in the market index:

This article was written by Justin Low at www.forexlive.com.