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.

• China is an important partner in all fields
• But relationship has now become more complex
• We do not want to separate from China
• But being too dependent on one country is a problem

Considering the current fragile state of Germany’s manufacturing sector, it’s not the best time to strain relations with China. That said, China could also do with some help as their own economy has been in limbo since the pandemic. Habeck’s remarks are ones to echo the recent G7 statement but that is something China has grown accustomed to already. At the end of the day, actions speak louder than words.

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

Fundamental
Overview

The USD last week saw a
quick dip across the board following the soft US CPI report as the market priced back in two rate
cuts by the end of the year. The moves were reversed soon after though as we
got a bit more hawkish than expected FOMC decision where the dot plot showed that the Fed expected just one cut for
this year despite the soft US CPI report.

Later on, Fed Chair Powell backpedalled on the projections making them a
bit less worrying as the central bank remains very data dependent. The US
Dollar eventually got supported in the last part of the last week as the risk
sentiment turned more cautious.

The EUR, on the other hand,
got hit hard by the European elections as the political uncertainty
weighed on the sentiment and led to some increase in bonds risk premia and
selloff in European stocks.

The risk sentiment has been
gradually improving this week although we are not out of the woods yet. The Flash
PMIs on Friday will likely be important catalysts in this regard.

EURUSD Technical
Analysis – Daily Timeframe

On the daily chart, we can
see that EURUSD has been pulling back this week after breaking through the key 1.0727
support zone. This is coming amid general US Dollar weakness
as the risk sentiment has been gradually improving. The buyers are gaining a
bit more confidence as the price rallied back above the 1.0727 level.

EURUSD Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see that we have a good resistance around the 1.0760 level where we can find
the confluence
of the trendline
and the 50% Fibonacci retracement.

This is where we can expect
the sellers to step in with a defined risk above the trendline to position for
a drop into the 1.06 handle with a better risk to reward setup. The buyers, on
the other hand, will want to see the price breaking higher to increase the
bullish bets into the 1.09 handle.

EURUSD Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can
see that the price has been printing higher highs and higher lows on this
timeframe as the bullish momentum started to pick up amid improving sentiment. The
sellers will want to see the price falling below the swing low at 1.0710 to regain
control and increase the bearish bets into new lows. The red lines define the average daily range for today.

Upcoming
Catalysts

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

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

Fundamental
Overview

The USD last week saw a
quick dip across the board following the soft US CPI report as the market priced back in two rate
cuts by the end of the year. The moves were reversed soon after though as we
got a bit more hawkish than expected FOMC decision where the dot plot showed that the Fed expected just one cut for
this year despite the soft US CPI report.

Later on, Fed Chair Powell backpedalled on the projections making them a
bit less worrying as the central bank remains very data dependent. The US
Dollar eventually got supported in the last part of the last week as the risk
sentiment turned more cautious.

The AUD, on the other hand,
got pressured mainly because of the risk-off sentiment and the US Dollar
strength. This week, the RBA
left the Cash Rate unchanged and kept a slightly hawkish stance. The central
bank decision coupled with a better risk sentiment gave the Aussie a boost.

AUDUSD
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that AUDUSD bounced from the key support
zone around the 0.66 handle and extended the rally following the slightly hawkish
RBA decision and the good US
Retail Sales report.

The natural target for the
buyers is the resistance around the 0.6712 level. That’s where we can expect
the sellers to step in with a defined risk above the resistance to position for
a drop back into the bottom of the range.

AUDUSD Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see more clearly the rangebound price action between the 0.67 resistance and
the 0.66 support. These will be the key levels that the market will likely need
to break to start a more sustained trend. For now, will could keep bouncing
around until we get a clear breakout.

AUDUSD Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can
see that the price bottomed around the support and once it broke above the trendline
the bearish momentum started to wane. Eventually, the break above the 0.6620
level gave the buyers enough conviction to pile in more aggressively and extend
the rally towards the top of the range.

If we get a pullback, the
buyers might lean on the trendline and the 50% Fibonacci
retracement level around the 0.6640 level. The sellers, on the other hand, will
have a better risk to reward setup around the 0.67 resistance, but if the price
breaks below the trendline, the bearish momentum might increase and see the
sellers piling in to target a breakout to the downside. The red lines define
the average daily range for today.

Upcoming
Catalysts

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

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

Headlines:

• RBA leaves cash rate unchanged at 4.35%, as expected
• RBA’s Bullock: We did not consider the case for a rate cut today
• RBA’s Bullock: We need a lot to go our way to bring inflation back to range
• ECB’s de Guindos: Best time to make rate decisions is together with updated projections
• Gold stays in consolidative mode but the technical risks are growing
• Germany June ZEW survey current conditions -73.8 vs -65.0 expected
• Eurozone May final CPI +2.6% vs +2.6% y/y prelim
• Citi raises S&P 500 year-end target to 5,600 from 5,100 previously

Markets:

• CHF leads, NZD lags on the day
• European equities slightly higher; S&P 500 futures flat
• US 10-year yields up 1.2 bps to 4.290%
• Gold down 0.4% to $2,310.01
• WTI crude flat at $80.35
• Bitcoin down 1.8% to $65,202

The dollar is holding steadier on the day, keeping a little higher ahead of the next big event on the calendar later today.

The US retail sales data for May is due and that will be one to watch for markets, in following up from the Fed decision last week.

EUR/USD and GBP/USD are both down 0.2% to 1.0710 and 1.2675 respectively, while USD/JPY pushed higher from 157.60 in Asia to hold just above 158.00 currently.

The franc continues to hold its own ahead of the SNB later this week, with USD/CHF down 0.2% to 0.8875. The pair is now testing waters below its 200-day moving average of 0.8895 on the day.

The aussie is lightly changed at 0.6610 against the dollar with the RBA offering a nothing burger on the day. RBA governor Bullock did say that they did discuss rate hikes today but quickly toned that down by stating the preference to want to cut rates instead as their next move.

In other markets, bond yields are a touch higher again today while equities sentiment is more muted overall. European indices may be higher but it owes to Wall Street gains yesterday. There was a bit of a struggle early on with French stocks briefly paring opening gains. That’s an indication that the political woes are still in play in the bigger picture.

As for commodities, precious metals are lower again and gold might be seeing a more troubling sign when it comes to the charts. So, keep an eye out for that.

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