Chat with us, powered by LiveChatUS Fed Policy Expectations, and Commodity Trends

US Fed Policy Expectations, and Commodity Trends

US Fed Policy Expectations, and Commodity Trends

US Fed Policy Expectations, and Commodity Trends

The Japanese yen depreciated to approximately 159 per dollar, nearing the crucial 160 level that prompted authorities to intervene in late April. Masato Kanda, Japan’s top currency diplomat, emphasized that the government is prepared to take additional measures against speculative currency movements. Additionally, the US Treasury included Japan in a list of countries under scrutiny for potential currency manipulation. These developments coincided with the Bank of Japan's decision last week to maintain its substantial bond purchases unchanged. The central bank announced plans to unveil a strategy for reducing its bond-buying program at the upcoming policy meeting in July. In economic news, Japan's annual headline inflation rate rose to 2.8% in May from 2.5% in April, marking the highest level since February. However, the core inflation rate accelerated to 2.5% from 2.2%, falling short of expectations set at 2.6%.

On Friday, the dollar index maintained its position above 105.5 after gaining 0.4% in the previous session, bolstered by expectations that the Federal Reserve will be more cautious in easing monetary policy compared to other major central banks. While the US central bank has advocated for prudence before reducing interest rates, the ECB, SNB, and BOC have already begun rate cuts. The Bank of England has also signaled readiness to lower borrowing costs soon, while the BOJ is potentially considering raising rates further. In economic news released on Thursday, initial jobless claims exceeded expectations, remaining near ten-month highs. Additionally, both housing starts and building permits dropped to approximately four-year lows, and the Philadelphia Fed Manufacturing Index unexpectedly declined. Market sentiment suggests expectations that the Fed will implement two 25 basis point rate cuts by the year's end.

Gold remained stable around $2,360 per ounce on Friday, staying at its highest level in two weeks and poised to register its second consecutive weekly gain. Soft US economic data reinforced expectations that the Federal Reserve could lower interest rates this year. Last week's reports highlighted a slowdown in both the labor market and inflationary pressures, alongside disappointing retail sales figures on Tuesday, suggesting ongoing sluggishness in US economic activity during the second quarter. Additionally, initial claims for unemployment benefits edged lower last week, while new housing construction in May dropped to its lowest point in nearly four years. Investors are now awaiting the release of flash purchasing managers' indexes later in the day for further insights into the strength of the economy.

WTI crude futures maintained levels above $81 per barrel on Friday, marking a more than 3% increase for the week and poised for a second consecutive weekly gain. The rise was driven by declining US crude inventories and heightened tensions in the Middle East, which bolstered oil prices. Data from Thursday indicated a large decrease of 2.547 million barrels in US crude stockpiles last week, surpassing forecasts for a 2 million barrel drawdown. Surprise reductions in US gasoline and distillate stocks further suggested strong energy demand. In the Middle East, Israeli military actions advancing into the Gaza Strip city of Rafah escalated geopolitical tensions, raising concerns about potential disruptions to oil flows in the region. Additionally, expectations of multiple interest rate cuts by major central banks this year, with the ECB, SNB, and BOC already in easing cycles, contributed to the positive outlook for oil prices.

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