Markets’ positive trend may continue in August, GBP/USD and gold sees potential rise
August 1, 2023 1:22 pm
Global stock markets finished July with confident growth, despite decisions by the Federal Reserve, the European Central Bank, the Bank of England, and some other central banks to raise key interest rates. It seems that the overall positive sentiments may continue into the last month of the calendar year. At the same time, the U.S. dollar came under pressure against a basket of major currencies.
Indeed, the second month of summer turned out to be quite good in terms of results. Stock markets showed a positive trend due to the increase in government bond yields, which, in turn, rose as a response to expectations of rate hikes both in the U.S., Europe, and other regions of the world. On the other hand, their actual increase was accompanied by a rise in yields. However, this trend did not continue significantly due to investors’ hopes that the interest rate hike cycle, primarily in the U.S., is nearing its end, and therefore, one should expect a possible rate cut in the next year to stimulate the local economy. In any case, based on its monetary concept, the Federal Reserve has acted this way in recent decades and at the beginning of the current century.
Certainly, in such a situation, when the peak of rate hikes is approaching its end, the U.S. dollar faces serious pressure from its opponents among major currencies. This is due to the fact that the ECB, the Bank of England, and others will still be forced to continue raising borrowing costs due to persistently high inflation in the euro and British regions, as well as in some other countries. This will actively prevent the dollar from rising. And if such attempts are made, it will only be due to local speculation driven by geopolitical issues, where the U.S. currency is traditionally considered a safe-haven asset.
What can the markets expect in August?
We assume that inflation worldwide will continue its gradual decline. At the same time, business and manufacturing activity is likely to increase, but also gradually. The possible easing of the conflict in Ukraine will contribute to this if, of course, it does not become more global.
Investors’ understanding that the rate hike cycle in the U.S., as well as the relatively good state of its economy, will stimulate a recovery rally in the stock markets. Government bond yields are also likely to remain near current levels, but this is unlikely to significantly support the U.S. dollar, which will be weighed down by the process of rate hikes by other world central banks. However, it is also unlikely to expect a substantial decline in the dollar against a basket of major currencies. This process will begin only if the Federal Reserve decides on stimulus measures, which means reducing interest rates early next year to actively support American manufacturers. Much will also depend on the winner of the 2024 presidential elections in the United States.
Will the rally continue this week?
Yes, this possibility remains, but much will depend on the economic data released, primarily from the United States, where employment figures for July will play a significant role, and the Bank of England’s decisions on further rate hikes.
The overall positive trends of June and July will likely continue not just this week but also for the entire month.
Forecast:
GBP/USD
The pair is consolidating above the level of 1.2775. It may find support if the Bank of England raises interest rates again. In this case, after rising above the 1.2900 level, the pair may first grow to 1.2990 and then continue to rise to 1.3135.
XAU/USD
Gold is also consolidating while awaiting fresh employment and manufacturing data, especially from the United States. The price may correct down to 1941.60 before resuming its rise to 1985.00, still remaining within the range of 1941.60–1985.00.
The material has been provided by InstaForex Company – www.instaforex.com
Global stock markets finished July with confident growth, despite decisions by the Federal Reserve, the European Central Bank, the Bank of England, and some other central banks to raise key interest rates. It seems that the overall positive sentiments may continue into the last month of the calendar year. At the same time, the U.S. dollar came under pressure against a basket of major currencies.
Indeed, the second month of summer turned out to be quite good in terms of results. Stock markets showed a positive trend due to the increase in government bond yields, which, in turn, rose as a response to expectations of rate hikes both in the U.S., Europe, and other regions of the world. On the other hand, their actual increase was accompanied by a rise in yields. However, this trend did not continue significantly due to investors’ hopes that the interest rate hike cycle, primarily in the U.S., is nearing its end, and therefore, one should expect a possible rate cut in the next year to stimulate the local economy. In any case, based on its monetary concept, the Federal Reserve has acted this way in recent decades and at the beginning of the current century.
Certainly, in such a situation, when the peak of rate hikes is approaching its end, the U.S. dollar faces serious pressure from its opponents among major currencies. This is due to the fact that the ECB, the Bank of England, and others will still be forced to continue raising borrowing costs due to persistently high inflation in the euro and British regions, as well as in some other countries. This will actively prevent the dollar from rising. And if such attempts are made, it will only be due to local speculation driven by geopolitical issues, where the U.S. currency is traditionally considered a safe-haven asset.
What can the markets expect in August?
We assume that inflation worldwide will continue its gradual decline. At the same time, business and manufacturing activity is likely to increase, but also gradually. The possible easing of the conflict in Ukraine will contribute to this if, of course, it does not become more global.
Investors’ understanding that the rate hike cycle in the U.S., as well as the relatively good state of its economy, will stimulate a recovery rally in the stock markets. Government bond yields are also likely to remain near current levels, but this is unlikely to significantly support the U.S. dollar, which will be weighed down by the process of rate hikes by other world central banks. However, it is also unlikely to expect a substantial decline in the dollar against a basket of major currencies. This process will begin only if the Federal Reserve decides on stimulus measures, which means reducing interest rates early next year to actively support American manufacturers. Much will also depend on the winner of the 2024 presidential elections in the United States.
Will the rally continue this week?
Yes, this possibility remains, but much will depend on the economic data released, primarily from the United States, where employment figures for July will play a significant role, and the Bank of England’s decisions on further rate hikes.
The overall positive trends of June and July will likely continue not just this week but also for the entire month.
Forecast:
GBP/USD
The pair is consolidating above the level of 1.2775. It may find support if the Bank of England raises interest rates again. In this case, after rising above the 1.2900 level, the pair may first grow to 1.2990 and then continue to rise to 1.3135.
XAU/USD
Gold is also consolidating while awaiting fresh employment and manufacturing data, especially from the United States. The price may correct down to 1941.60 before resuming its rise to 1985.00, still remaining within the range of 1941.60–1985.00.
The material has been provided by InstaForex Company – www.instaforex.com
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