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What’s happening: The US dollar recorded gains versus most of its peers on Monday, despite its steep decline against the Japanese yen earlier in the session.
What happened: Rising geopolitical concerns sent investors flocking to add more safe havens in their portfolios.
Trading activity remained lighter on Monday, with markets in the UK closed for a public holiday.
Why it matters: The Japanese yen climbed earlier in the session on Monday due to speculations of interest rate cuts by the US Federal Reserve in September. Fed Chairman Jerome Powell said during his recent speech in Jackson Hole, Wyoming that the time had come for rate cuts.
On Friday, Bank of Japan Governor Kazuo Ueda reiterated his plans of hiking increase rates in case inflation remained on track to sustainably reach the 2% goal.
The USD/JPY forex fell to a three-week low of 143.45 earlier during the session but turned higher later by around 0.1% to 144.52.
The greenback rebounded versus the yen following the release of economic data, which showed US durable goods orders growing by 9.9% in July, after contracting by 6.9% in June. This was the highest growth rate since May 2020 and came in significantly higher than market expectations of 5%.
However, non-defence capital goods orders, excluding aircrafts, slipped 0.1% in July, following a 0.5% rise in the prior period.
The US dollar index, which measures the greenback’s performance versus a basket of major peers, gained more than 0.1% to reach 100.85 on Monday, rebounding from its weakest level since late December.
The EUR/USD forex pair fell around 0.3% to 1.1163, with investors preferring safe-haven currencies. There are speculations of the European Central Bank looking to announce an interest rate cut at its September meeting.
The GBP/USD fell around 0.2% to 1.3187 on Monday, after rising as high as 1.3229 during Friday’s session for the first time in 17 months.
What to watch: Investors will continue monitoring comments from Fed and ECB speakers regarding their monetary policy.
Data on home prices index, consumer confidence and Richmond Fed manufacturing index from the US will also remain in focus. The S&P CoreLogic Case-Shiller home price index, which rose 6.8% year-over-year in May, is projected to increase 6% in June. Analysts expect CB consumer confidence to rise slightly to 100.6 in August, from 100 in July. The composite manufacturing index in the US Fifth District is likely to improve slightly to -14 in August, from a reading of -17 in July.
Context: Crude oil prices rose sharply on Monday, amid heightened supply concerns.
Details: Both WTI and Brent crude prices extended gains on Monday, after ending last week on a strong note, gaining more than 2% on Friday.
Libya’s eastern-based government announced plans to close oil fields and suspend oil production on Monday, amid rising tensions with the government based in Tripoli.
Investors continued monitoring comments from the OPEC+ (Organization of Petroleum Exporting Countries and its allies), which is looking increase oil output later this year.
More signs of lacklustre economic growth in the US, along with concerns over its job market, limited the overall gains for crude oil. Last week, the US government revised its figures for jobs added from April 2023 to March 2024 to around 2.1 million, from the earlier reported figure of 2.9 million.
Strength in the US dollar also exerted some pressure on crude oil prices on Monday.
WTI crude oil futures gained $2.61 to close at $77.42 per barrel on Monday, while Brent crude surged $2.21 to settle at $80.36 per barrel.
In other energy trading, gasoline rose to $2.1349 a gallon, while heating oil jumped to reach $2.3697 a gallon, However, natural gas prices fell more than 2% to settle at $2.130 per million British thermal units.
What to watch: Investors await the release of the American Petroleum Institute’s report on crude oil stockpiles. US crude oil inventories had risen by 0.347 million barrels in the week ending August 16, after a drawdown of 5.205 million barrels in the prior week.
Other Markets: European indices closed mixed on Monday, with the DAX 40 and STOXX Europe 600 Index down by 0.09% and 0.02% and the FTSE 100 and CAC 40 up by 0.48% and 0.18%, respectively.
The White House said that US President Joe Biden and Indian Prime Minister Narendra Modi discussed the ongoing Russia-Ukraine war, after Modi visited both countries. The RUB/USD pair rose in forex trading this morning.
Turkey’s manufacturing confidence index declined to 98.5 in August, from 100.3 in the earlier month. The region’s business mood falling to a 20-month low exerted pressure on the TRY/USD forex pair.
Brazil’s FGV-IBRE Consumer Confidence Index rose for a third straight month to 93.2 in August, versus a reading of 92.9 in July. However, the BRL/USD pair remained flat in forex trading this morning.
Germany’s Ifo Business Climate indicator eased to 86.6 in August, from 87 in July. However, the figure coming in above market estimates of 86 lent support to the EUR/USD forex pair.
China’s industrial profits grew by 3.6% year-over-year to 4,099.17 billion yuan during the first seven months of the year, following a 3.5% increase in the previous period. However, the CNY/USD pair fell in forex trading this morning.
Germany’s GDP growth rate, UK’s CBI distributive trades, Brazil’s mid-month inflation rate, Mexico’s balance of trade, Canada’s wholesale sales, US Redbook index, FHFA house price index, Dallas Fed services index, Dallas Fed services revenues index, and money supply M2, as well as Spain’s consumer confidence.
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