Monthly Market Update-Key Summary and Review for July 2024

Key Observations for July 2024

Interest Rates:

• The Federal Reserve is expected to keep interest rates unchanged, concluding its inflation control measures
• Short-term interest-rate futures edged up after inflation data, with traders anticipating a rate hold in July and potential rate cuts starting in September
• The European Central Bank (ECB) and Bank of England (BoE) are also maintaining cautious stances, with ECB policymakers supporting further rate cuts as inflation moves back toward the target
• Japan’s central bank has raised its benchmark interest rate to “around 0.25%” from it previous range of 0% to 0.1%.

Inflation Rates:

• U.S. inflation data showed mixed signals, with the Personal Consumption Expenditures (PCE) Price Index matching forecasts, but the Core PCE Price Index slightly above expectations.
• The ECB survey indicated that eurozone inflation expectations for the next 12 months eased slightly to 2.8%.
• Japan’s Core CPI rose 2.6% annually, slightly below the forecast of 2.7%.

Manufacturing Indicators:

• U.S. manufacturing showed continued weakness, with the June ISM Manufacturing PMI at 48.5, below the forecast of 49.1.
• The S&P Global Manufacturing PMI for July came in at 49.5, below expectations and indicating contraction.
• Eurozone and German business activities showed signs of contraction in July, impacting the broader economic outlook.

Employment Figures:

• U.S. job openings experienced a slight decline, while consumer confidence in the labor market decreased
• June jobless claims were better than expected at 235,000, down from the previous 243,000.
• June Non-Farm Payrolls came in at 206,000, above the forecast but down from the previous month.
• The unemployment rate in the U.S. rose slightly to 4.1% in June.

GDP and Economic Growth:

• The U.S. Q2 GDP advance estimate was 2.8%, beating the forecast of 2.0%.
• The global economy is projected to grow by 3.1% in 2024 and 2025, an increase from previous forecasts.
• Japan’s economic growth outlook remains mixed, with expectations of a potential rate hike by the BOJ.

Consumer Confidence and Spending:

• U.S. consumer confidence stood at 100.3 in July, slightly above the forecast but lower than the previous month.
• June PCE Services Prices remained unchanged, while Personal Income and Consumption showed mixed results.
• Eurozone consumer confidence increased slightly in July, reaching -13.0.

Housing Market:

• U.S. home prices remained flat in May, and June existing home sales fell significantly.
• Record-high house prices are contributing to a decline in U.S. home sales.

July 2024 saw cautious moves in monetary policy, with major central banks like the Fed, ECB, and BOJ maintaining or considering adjustments to interest rates. Inflation showed signs of easing, but mixed signals persisted across different regions. Manufacturing indicators pointed to a sluggish economic environment, particularly in the U.S. and Eurozone. Employment figures were mixed, with some positive signs in jobless claims but concerns over declining job openings. U.S. GDP growth exceeded expectations, and global economic growth forecasts improved slightly. Consumer confidence and spending showed  resilience despite challenges in the housing market. Commodity markets experienced volatility, reflecting broader economic uncertainties.

Summary of Currency Performances for July 2024

EUR/USD (Euro/US Dollar):

• The euro showed mixed performance against the US dollar throughout July 2024. Early in the month, the EUR/USD pair saw some gains as ECB policymakers indicated no rush to cut rates further despite ongoing inflation concerns​.

The final price for EUR/USD at the end of July was relatively unchanged from its position earlier in the month, reflecting overall market consolidation and cautious sentiment .

GBP/USD (British Pound/US Dollar):

• The British pound showed resilience early in the month, boosted by political stability after the UK Labour Party’s election victory and expectations of potential rate cuts by the Bank of England later in the year.
• 7Towards the end of the month, the pound remained relatively stable against the US dollar despite ongoing economic uncertainties and global market fluctuations .
• The final price for GBP/USD at the end of July was slightly lower due to minor fluctuations but remained stable overall .

USD/JPY (US Dollar/Japanese Yen):

• The Japanese yen strengthened significantly against the US dollar throughout July, driven by speculation of potential rate hikes by the Bank of Japan .
• The final price for USD/JPY at the end of July reflected the yen’s overall strength, with significant gains compared to earlier in the month .

Summary of Bitcoin, Oil, and Gold Performances for July 2024

Bitcoin:

• Bitcoin experienced notable volatility throughout July 2024, reflecting broader market sentiment and investor behavior.
• Towards the end of the month, Bitcoin prices recovered, supported by a broader risk-on sentiment in financial markets and increased adoption of blockchain technologies.

Oil:

• Towards the end of the month, oil prices saw a recovery, driven by expectations of tighter supply and ongoing geopolitical risks.
• The final price for Brent and WTI crude oil at the end of July showed a slight increase from the beginning of the month, reflecting overall market resilience despite volatility.

Gold:

• Towards the end of the month, gold prices rebounded, driven by renewed concerns over global economic stability and expectations of potential rate cuts by the Federal Reserve.

Key Risk Factors and Market Dynamics for July 2024

Key Risk Factors:

1. Central Bank Policies:
   • Uncertainty surrounding the Federal Reserve’s interest rate decisions was a significant risk factor. Speculation about potential rate cuts later in the year influenced market sentiment and investor behavior.
   • The ECB’s cautious approach to rate cuts and the BOJ’s consideration of rate hikes added to the global monetary policy uncertainty, impacting currency and bond markets.
2. Economic Data and Indicators:
   • Mixed economic data from the U.S., including jobless claims, consumer sentiment, and manufacturing indicators, created an uncertain economic outlook. This data influenced expectations for future Fed actions and market movements.
   • Weak economic data from the eurozone and concerns over China’s economic slowdown added to global growth fears, affecting investor confidence and commodity prices.
3. Geopolitical Tensions:
   • Geopolitical events, such as tensions in the Middle East and trade uncertainties, posed risks to global markets. These tensions affected oil prices and heightened market volatility.
   • Political developments in the UK and France, including the UK election outcome and France’s parliamentary dynamics, introduced additional political risk into European markets.
4. Inflation Concerns:
   • Persistently high inflation in various regions, despite some easing signals, remained a concern for investors. Inflation dynamics influenced central bank policies and market expectations.
   • Rising service costs in the eurozone and wage pressures in the UK highlighted ongoing inflationary risks, impacting market sentiment and interest rate expectations.
5. Currency Fluctuations:
   • Significant movements in major currencies like the Japanese yen and the euro against the US dollar introduced forex market risks. These fluctuations were driven by central bank policy speculations and economic data releases.
   • The strength of the Japanese yen and the volatility of the British pound influenced global market dynamics and investment flows.

Market Dynamics:

1. Monetary Policy Expectations:
   • The anticipation of potential rate cuts by the Federal Reserve and the cautious stance of the ECB shaped market dynamics. These expectations influenced bond yields, equity markets, and currency valuations.
   • The BOJ’s potential rate hike considerations added to the complexity of global monetary policy expectations, impacting the Japanese yen and broader market sentiment.
2. Economic Resilience and Recovery:
   • U.S. economic resilience, as indicated by positive GDP growth and robust job data, supported market optimism. This resilience influenced risk appetite and equity market performance.
   • Concerns over the eurozone’s economic growth and China’s slowdown weighed on global market sentiment, affecting commodity prices and investor confidence.
3. Commodity Market Movements:
   • Volatility in oil prices due to geopolitical tensions and supply concerns influenced energy markets and broader economic outlooks. Fluctuations in oil prices affected inflation expectations and central bank policies.
   • Gold and copper prices reflected broader market sentiment, with gold acting as a safe-haven asset amid uncertainties and copper prices indicating demand concerns from China.
4. Corporate Earnings and Market Sentiment:
   • Corporate earnings reports, particularly from major technology companies, shaped market sentiment and influenced equity market performance. Positive earnings supported risk appetite, while misses led to sell-offs.
   • Market sentiment was also influenced by broader economic and political developments, including geopolitical risks and central bank policy announcements.
5. Global Trade and Supply Chain Issues:
   • Ongoing trade uncertainties and supply chain disruptions continued to pose risks to global markets. These issues affected manufacturing indicators and corporate profitability.
   • Trade tensions, particularly involving major economies like the U.S. and China, remained a concern for global economic stability and market dynamics.

Summary

July 2024 was characterized by significant risk factors, including central bank policies, economic data uncertainties, geopolitical tensions, inflation concerns, and currency fluctuations. These risks shaped market dynamics, influencing monetary policy expectations, economic resilience perceptions, commodity market movements, corporate earnings, and global trade issues. The interplay of these factors created a complex and volatile market environment, with investors navigating a landscape of uncertainties and potential opportunities.