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Asset Watch
Tuesday, July 30 2024
Markets expect the Fed to maintain US interest rates at 5.50% during this week’s FOMC meeting. However, investors will be closely watching the Fed chair’s press conference for insights into the Fed’s assessment of the US economy and the potential number of rate cuts by the end of 2024.
Markets have already priced in two 25 basis point rate cuts, one in September and another in December, due to several factors. First, high delinquency rates on credit card payments and car loans have reached 6.86%, after being near 3% just two years ago. The New York Fed reported that total household debt increased by 1.1% last quarter to $17.69 trillion. Second, stable oil prices could significantly impact inflation rates, as evidenced by the YoY PCE rate nearing its 2% target, having dropped to 2.5% in July. Third, the weakening labour market, with fewer jobs added every month and a rising unemployment rate surpassing the 4.0% threshold, has increased pressure on the central bank to normalise its policy and move interest rates to neutral levels that neither stimulate nor hinder economic growth.
Chart Source: ADSS Platform
On July 25, gold declined to a multi-week low at $2353/oz before rebounding from the 50-day simple moving average. Yesterday, the price tested the high end of the current trading zone located between $2400- $2288 but failed to close above it. However, a daily close above the high end of the zone opens the door for bulls to rally the price towards the $2500 mark. Conversely, repeated failures of the price to close above the high end of the zone highlight bulls’ weakness, potentially allowing bears to take the initiative and press towards the low end of the zone.
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