Forex Markets Analysis 3 June 2024

CURRENCIES:

Key Events and Predictions

ECB Rate Decision:

• The European Central Bank (ECB) is expected to cut interest rates by 25 basis points on Thursday.
• Markets speculate the next cut may occur on either September 12th or more likely on October 17th.
• Key focus on ECB President Christine Lagarde’s signals regarding future rate cuts during the post-decision press conference.

US Jobs Data:

• US jobs week concludes with Nonfarm Payrolls (NFP) on Friday, following JOLTS, ADP, and initial jobless claims earlier in the week.
• Market outlook on US rate cuts delayed due to persistent high inflation.
• Any signs of a weakening US job market may lead to a re-pricing of US interest rate cut expectations.

Other Key Data:

• Bank of Canada’s policy decision.
• Australian GDP release.
• US ISM Services data.

Market Movements and Technical Analysis

US Dollar (USD):

• The US dollar is under pressure, nearing a two-month low.
• The USD index is testing the 200-day simple moving average.
• A confirmed break lower could see the USD trade below 104.00.

Gold:

• Gold prices are vulnerable to a downward move.
• Rising US Treasury yields are influencing gold prices.
• Target level: $2,280/oz.
• Friday’s NFP report will be critical for gold’s future performance.

Nasdaq 100:

• The Nasdaq 100 index turned lower, affected by the performance of its key components, the Magnificent Seven.
• Friday’s price action will be crucial for potential recovery.
• The index remains vulnerable due to its concentration in a few mega-cap companies.

STOCK MARKET:

Key Market Indices

• Nasdaq Composite (IXIC): Near flat over the past five trading sessions.
• S&P 500 (GSPC): Rose less than 0.2%.
• Dow Jones Industrial Average (DJI): Down nearly 1%.

Market Overview

May Performance:

• Stocks stumbled at the end of May.
• Investor enthusiasm for AI paused.
• Concerns over the Federal Reserve holding interest rates higher for longer.

Upcoming Economic Data

• Labor Market Updates:
  • May Jobs Report: Set for release on Friday.
  • Additional Data: Job openings and private wage growth updates.
  • Sector Activity: Readings on services and manufacturing sectors expected.

Corporate Earnings

• Quarterly Results:
  • CrowdStrike (CRWD)
  • Lululemon (LULU)
  • Dollar Tree (DLTR)

Inflation Insights

• PCE Index Update:
  • April reading showed a 0.2% increase from the prior month.
  • Lowest monthly increase in 2024.
  • Economists noted it as better news on inflation compared to Q1.
  • Investors’ interest rate cut expectations remained unchanged.

Federal Reserve Outlook:

• Officials require “greater confidence” in inflation’s decline before cutting rates.

Labor Market Lookahead

• May Jobs Report Expectations:
  • Forecast: 185,000 nonfarm payroll jobs added.
  • Unemployment Rate: Expected to hold steady at 3.9%.
  • April Data: 175,000 jobs added, unemployment at 3.9%.

Summary

• Market Sentiment: Investor sentiment will be tested with the upcoming labor market data.
• Fed’s Path: Key focus on how the labor market data influences the Federal Reserve’s interest rate decisions.

CRYPTOCURRENCIES:

• Bitcoin was little changed at $70,000
• Ether increased 1.71% to $3,764

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