As the world mourns the death of Her Majesty Queen Elizabeth II, world leaders pay tribute for her incredible service and leadership. The UK enters a 10-day mourning period that will see some events delayed or suspended. The BOE announced they will push back their interest rate decision to September 22nd. UK train strikes will be delayed as three British trade unions will suspend their scheduled strike action. The Office of National Statistics confirmed the upcoming economic publications are due to go ahead. That includes UK trade, GDP, unemployment, inflation, housing, and retail sales data.
Wall Street is finishing the week on a positive note as the dollar’s rally has run out of steam as optimism grows for inflation to continue to come down. Economists are slightly lowering their inflation forecasts and that could mean the Fed won’t have to take rates above 4%. Another round of hawkish speak from both the Fed’s Bullard and Waller was not able to derail today’s stock market rally. It is looking like traders are growing confident they will soon see the end of the Fed’s interest rate hiking cycle.
Supporting the risk-on narrative was softer-than-expected Chinese consumer and producer inflation data that could pave the way for more easing by the PBOC.
Crude prices are rallying on supply risks and as the dollar has tentatively peaked. Lately it has been mostly bad news for oil prices as demand concerns worsened given China’s deteriorating COVID situation, a surprise jump in stockpiles, and on expectations world leaders will continue to exhaust emergency measures to send energy prices lower. Energy Secretary Granholm said President Biden is considering the new releases from the US Strategic Petroleum Reserve (SPR).
Russia President Putin’s threat to cut off all energy supplies is a growing risk as Ukraine recaptures territory. The risk of some supply disruptions over the next few months remains elevated and that should help oil prices stay above the $90 a barrel level.
Gold is higher as the historic run higher in the dollar appears to have run out of steam. It seems Wall Street is getting comfortable with the idea of another 75-basis point rate hike by the Fed. Fed’s Bullard supports a third straight 75-bp interest rate hike even if next week’s inflation reports show price pressures continued to ease. Fed’s Waller also supports another significant rate hike this month.
Gold is finding a home above the $1700 level and that could continue if investors continue to look beyond hawkish central bank speak. Gold’s fate could be determined after this next inflation report. If consumer prices come in hotter-than-expected, gold might see selling pressure target the $1680 region. A sharp deceleration with pricing pressures might only provide a modest boost higher for gold as policy makers.
Bitcoin is welcoming the return of risk appetite and a falling US dollar. The broad market rally has rejuvenated cryptos and that could continue if investors continue to look beyond hawkish central bank overtures and lingering recession risks.
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