This week is set to be eventful for the markets with the Federal Reserve, Bank of England, and Bank of Japan all holding monetary policy meetings. Additionally, focus will be on the U.S. jobs report on Friday and more earnings from major tech companies. Here’s a look at what’s happening in the markets this coming week.
Federal Reserve Decision
There is currently an 88% chance priced into the markets for a rate cut in September amidst signs of declining inflation and rising unemployment this week. Fed Chair Jerome Powell’s policy statement will be closely watched. The Federal Reserve, which concludes its policy meeting on Wednesday, has stated it wants to be confident that inflation is moving sustainably toward its 2% target before cutting rates. Friday’s inflation data confirmed expectations that the Fed will pave the way for a rate cut in September this week. The Fed has kept its benchmark overnight rate in the current range of 5.25%-5.50% since last July. It has raised the rate by 525 basis points since 2022.
Nonfarm Payroll Reports
The Fed’s statement on Wednesday will put Friday’s closely watched nonfarm payroll report under increased scrutiny as investors try to gauge whether the recent signs of a cooling labor market continued into July. Economists expect the U.S. economy to have created 177,000 jobs in July, down from 206,000 in the previous month. The unemployment rate, which has risen in each of the past three months, is expected to hold steady at 4.1%. Before Friday’s report, the U.S. will release the Job Openings and Labor Turnover Survey (JOLTS) data on Tuesday.
Ongoing Earnings from Major Tech Companies
Major tech companies are set to continue reporting their earnings in the coming days, and any disappointments could further roil markets already jittery over inflated stock valuations. Microsoft (MSFT) is scheduled to report earnings on Tuesday, followed by Meta, Facebook’s parent company (META) on Wednesday, and Apple (AAPL) and Amazon (AMZN) on Thursday. Disappointing figures could reignite concerns that triggered a sell-off in U.S. stocks last Wednesday, when both the S&P 500 and Nasdaq had their worst day since late 2022. The massive run-up in tech stocks may have set a high bar for their results. Alphabet (GOOGL), whose earnings helped trigger the sell-off, reported better-than-expected revenue, but investors became cautious that rising spending on AI infrastructure might squeeze profit margins, leading to a 5% drop in its shares.
Bank of England Meeting
The Bank of England meets on Thursday with investors divided on whether policymakers will deliver the first rate cut since 2020. Uncertainty is higher than usual ahead of the meeting as key central bank officials have not spoken publicly for over two months due to pre-election rules for the British general election on July 4. Investors are left guessing whether the recent stronger-than-expected service price inflation is enough to prevent the BOE from cutting rates from the highest level in 16 years at 5.25%. Last month, the BOE’s Monetary Policy Committee voted 7-2 to keep rates unchanged, but the minutes noted it was a “finely balanced” decision for some policymakers who did not vote for the cut.
Bank of Japan Decision
The Bank of Japan wraps up its latest policy meeting on Wednesday amid rising speculation about a potential rate hike after senior politicians, including the prime minister, hinted at the need to normalize policy in the near term. The impact of the weak yen on household and business spending has made the exchange rate a focal point at the ruling Liberal Democratic Party’s leadership conference in September. The yen’s impressive 10-yen rally against the dollar from its lowest levels in three decades at the start of the month has not stopped some from predicting a rate hike in July. They argue the BOJ could maximize the benefits of a rate hike by raising the yen’s interest rate. Others worry that the fragile economy and weak consumer sentiment cannot withstand higher borrowing costs, with the slowing U.S. growth already having an indirect impact.
Gold Rises on Rate Cut Hopes; Fed Could Drive Prices to This Level!
Gold prices rose globally during today’s trading on Monday, as geopolitical tensions in the Middle East escalated and amid expectations of a U.S. rate cut in September, while focus turned to the Federal Reserve’s monetary policy meeting scheduled for later this week. Prices are expected to maintain this range before the Fed meeting and Chairman Jerome Powell’s comments. If we get dovish signals from the Fed and weak jobs data, prices could head towards $2,450.
The Federal Open Market Committee (FOMC) of the U.S. central bank meets on July 30-31 and is expected to keep rates unchanged at 5.25%-5.50%. However, weak U.S. jobs data in June and comments from top Fed officials have led the futures market to fully price in a 25 basis point cut in September. The ADP National Employment Report, along with the U.S. Department of Labor’s nonfarm payrolls report, is due this week. Gold, historically known for its stability as a preferred hedge against geopolitical and economic risks, thrives in a low-interest-rate environment.
Meanwhile, the China Gold Association, the world’s largest gold consumer, said its domestic gold production rose by 0.58% year-on-year to 179.634 metric tons in the first half of 2024.
Gold at Friday’s Close
Gold futures prices gained during Friday’s trading, with investors assessing economic data showing a slowdown in inflationary pressures in the U.S. At settlement, gold futures for August delivery rose by 1.15% or $27.50 to $2,381 an ounce, but the yellow metal posted losses of 0.75%, continuing its decline for the second consecutive week. The U.S. Commerce Department reported on Friday that the Personal Consumption Expenditures (PCE) price index rose by 0.1% in June and was up 2.5% from a year earlier, a slowdown from May’s 2.6%. The report indicated that personal income rose by 0.2%, below expectations of 0.4%, and spending increased by 0.3%, matching expectations, with the savings rate falling to 3.4%, its lowest since November 2022.
Gold and the Dollar Now
Spot gold rose by 0.3% to $2,391.80 an ounce. U.S. gold futures increased by 0.4% to $2,390.50. Meanwhile, the dollar index fell by about 0.07% to 103.987 points.
Other Metals
Spot silver rose by 0.1% to $27.93 an ounce, platinum increased by 0.8% to $942.75, and palladium rose by 0.7% to $906.48.
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