Daily market commentary: 76% of investors predict a 0.25% rate cut


Daily Market News

ActivTrades’ Market Analysts have prepared for LeapRate their daily commentary on traditional markets for July 31, 2019. See details below:


FOREX

The Pound remains under pressure, despite a modest recovery against other major currencies during early Wednesday trading. On Tuesday Sterling touched its lowest in more than 2 years, as the probability of a no-deal Brexit continued to increase. The rhetoric, on both the EU and UK side, indicates an unwillingness to shift from their positions; the UK demands the scrapping of the Irish back stop arrangement, while the EU refuses to even re-open the negotiations on the agreement, established with the previous British government. The Brexit issue is now the great determining factor in the performance of British assets, the Pound in particular. Therefore, the risk ahead is very much to the downside, because it is unlikely that a smooth solution will be found in the short term.

Ricardo Evangelista – Senior Analyst, ActivTrades

EUROPEAN SHARES

European markets opened mixed for a second day in a row, after investors were left clueless as trade talks in Shanghai concluded with no obvious progress nor official comments. In addition, the flood of mixed corporate earnings hasn’t made it easy for traders to keep a clear view on where the stock markets are going. Samsung share price drifted lower after the company showed a sharp decline in profit whereas Apple went 4% up as the US tech giant topped projected revenue. Multiple automakers like Toyota, Honda, GM, Ferrari and BMW will be publishing their results later today and will provide investors with a better idea on where this sector is heading.

For now, all eyes are focused on the FOMC meeting later in the day, where a 25 basis point cut is already priced in by the market. A surprise could come from a deeper cut as well as by the tone Jerome Powell will use for his press conference, as many traders will try to assess whether other cuts are in the pipeline.

The stoxx-50 remains steady this morning and is struggling to recover the 3,465.0pts level after yesterday’s decline. The FTSE-100 is edging lower after a fall below 7,650.0pts but seems to have found support 100 points below towards 7,550.0pts. There is a good chance stock markets will remain quiet with no clear direction until the highly anticipated FOMC meeting tonight, ahead of next Friday’s job report.

FTSE-100

Pierre Veyret– Technical analyst, ActivTrades

FED

Investors are keenly awaiting tonight’s FOMC statement and Jerome Powell’s speech. Around 76% of investors is predicting a 0.25% rate cut, while the remaining 24% is betting on an even dovish Fed, with a 0.50% rate cut. In other words, markets have already discounted a 0.25% rate cut and only the second scenario would be a surprise. I think this is quite unlikely, as the Fed is usually moving when the consensus is close or above 60%. Moreover, a 0.50% rate cut while the economy is still growing will put the Fed in a more complicated scenario in case the economy falls into a recession in the next few months.

Carlo Alberto De Casa – Chief Analyst, ActivTrades

GOLD

In this scenario gold is continuing its recovery, with prices in area $1,430, with the 4h chart showing a slow but steady recovery, as investors are betting on a dovish Fed with 2 (or even 3, if necessary) rate cuts in 2019. If expectations are confirmed, the first target will be $1,450, while in the medium term bullion would might recover to the key resistance area of $1,500/1,530, where it started the big fall in April 2013.

Gold 4h chart

Carlo Alberto De Casa – Chief Analyst, ActivTrades

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Daily market commentary: 76% of investors predict a 0.25% rate cut

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