Markets awaiting the Fed and trade negotiations

The markets reduced expectations of interest rate cuts by the US Federal Reserve after the unexpected improvement in the US labor market.

The United States Government reported last Friday that 224 thousand jobs were created in June, well above what analysts expected. Now investors are wondering if the US central bank will make any rate moves to support economic growth.

Powell could provide more clues about the prospect of his short-term monetary policy on Wednesday, in his half-yearly testimony before the United States Congress. On the same day, the Fed will publish the minutes of its last monetary policy meeting

Futures on US interest rates still indicate a possible cut of 25 basis points at the next meeting from July 30 to July 31, but a drop of 50 basis points is practically ruled out.

Investors will also be watching the meeting between the United States and China to resume trade negotiations. China recently warned that in order to reach an agreement it is necessary for the United States to eliminate the current tariffs. While the White House economic adviser, Larry Kudlow, said he is not sure the negotiators can find a solution to the structural differences that still exist between both parties, and warned that there was no deadline to reach an agreement.

In the stock markets, the index that groups the shares of Asia and the Pacific fell on Tuesday 0.46%, the composite index of Shanghai lost 0.18% and the Nikkei 225 of Japan closed with a moderate advance of 0,14% in 21,565 points.

Wall Street closed the session on Monday with falls in its three main indices, the Dow Jones fell 0.43% to 26,806 integers, the selective S&P 500 lost 0.48% to 2,975 points, while the Nasdaq left a 0,78% up to 8,098 units.

Europe has started the session with significant falls that reach 1.21% in the German DAX 30, 0.28% in the FTSE 100 in London, 0.59% in the CAC 40 in Paris and 0.56% in the Euro Stoxx 50. The Ibex 35 loses 0.42% and has returned to below the 9,300 points.

In the currency markets, expectations of lower cuts in US interest rates strengthened the dollar. The dollar index is aimed at chaining its third day of gains and has been above the 97 points, in three-week highs. Against the yen, the greenback is trading at around 109 yen.

The euro fell 0.10% on Monday to $1.1215, after having lost 0.52% last Friday. The pound sterling fell 0.9% to $1.2515, in the Asian session continued to fall and at this time is trading at annual lows.

GBP/USD price chart
GBP/USD price chart from TradingView

On the daily chart of the GBP/USD currency pair, you can see how it is currently drilling at the key support of 1.2465 dollars, where it set the minimum of 2018. The loss of this price level could reactivate the bearish trend.

In commodities, Texas oil prices rose 0.26% to $ 57.66 per barrel. In the Asian session, they retreated slightly because worries that the slowdown in world economic growth could affect oil demand overshadowed tensions over Iran’s nuclear program.

The price of spot gold fell 0.34% to $ 1,394 and is aimed at stringing its fourth day of falls. At this moment the ounce of gold is trading at $ 1,390.

On the macroeconomic front, it should be noted that Italian retail sales unexpectedly fell from 4.2% to -1.8% annual rate.

Later in the day Canada building permits will be published, and in the United States we will know the Redbook retail sales index and the labor rotation and labor survey.


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