Euro Hits New Highs, Yen Strengthens, and Gold Stabilizes (08.23.2024)

The Euro has climbed to a new 13-month high against the US dollar as expectations grow for Federal Reserve rate cuts, with the dollar weakening in response. USD/JPY remains under pressure as Japan's core CPI hits 2.7%, reflecting the Bank of Japan's hawkish stance and fueling yen strength. Gold holds steady near $2,490 per ounce, awaiting further Fed policy signals, while GBP/USD trends upwards within its channel, eyeing a target of $1.3185. Silver is testing the 29.60 support level, with potential gains toward 30.48 if the support holds.

Euro Nears New High: USD Declines with Anticipated Fed Rate Reductions

The Euro reached a new 13-month peak against the US dollar on Monday and is close to achieving another high today. The US dollar continues to weaken as the Federal Reserve plans a series of interest rate cuts, anticipated to begin in September. Fed Chair Jerome Powell’s upcoming speech at the Jackson Hole Symposium on Friday could provide the market with clearer insight into the central bank's current outlook and the anticipated pace of rate reductions.

Japan’s Core CPI Rises to 2.7%: BOJ’s Hawkish Shift and Yen Rally

In July 2024, Japan’s core consumer price index, which excludes fresh produce but includes fuel expenses, rose by 2.7% year-over-year, reaching its highest level since February and aligning with expectations. This core inflation measure also accelerated for the third consecutive month following a 2.6% increase in June. Japan’s core inflation rate has consistently remained above the Bank of Japan’s 2% target for over two years, reinforcing the central bank’s hawkish shift this year. In March, the BOJ adjusted its monetary policy by raising interest rates for the first time since 2007 and ending eight years of negative rates in response to rising wages and elevated inflation. The central bank followed this with another rate hike in July, increasing rates from near-zero levels and indicating a willingness to raise them further. However, this hawkish approach led to a strong yen rally, which triggered a significant unwinding of popular carry trades and disrupted financial markets.

Gold Prices Remain Firm as Fed Rate Cut Expectations Build

Gold stabilized around $2,490 per ounce on Friday, after dropping more than 1% in the previous session from its record highs, as markets awaited Fed Chair Jerome Powell’s speech at the Jackson Hole symposium later in the day. There is widespread anticipation that Powell will indicate the Fed’s plan to start easing its restrictive policy in September, though details on the pace and extent of the reduction are expected to be limited. Recently, several Fed officials have shown optimism about a potential rate cut next month, a sentiment reflected in the latest FOMC minutes. Traders are still expecting 100 basis points in rate cuts by the end of the year, which would reduce the opportunity cost of holding non-yielding assets. Moreover, recent data suggests the US labor market might struggle under restrictive rates. Initial jobless claims in the US slightly exceeded forecasts in mid-August, raising concerns after the significant downward revision to nonfarm payrolls for the year ending in March.Bottom of Form

GBP/USD in Ascending Trend Channel, Targets $1.3185

GBP/USD is in a medium-long term ascending trend channel. This indicates increasing optimism among investors and suggests that the uptrend is continuing.

It continues to rise to break the $1.3100 barrier and strengthen expectations for a continuation of the uptrend, with the expected new target of $1.3185 on the way.

The expected rise may remain valid as long as it cannot hold below the $1.3000 level.

Silver Tests 29.60 Support; Potential for Move to 30.48

Silver seems to have formed a downward channel after failing to break the 32.55 level. If it breaks the 29.60 level, it may advance to the 30.48 level and continue its upward trend.