Market rally boosted by optimism as Economic Data and Central Banks Insights shaped sentiment


General Comment

Strong was the recovery in the financial markets that we saw last week in most major equity indices worldwide. The SP500 and Nasdaq100 reached new record highs as investor sentiment improved following data revealing a slowdown in US job markets for June and a rise in the unemployment rate to its highest point since late 2021. This data led to a decrease in bond yields and fuelled speculation about a possible rate cut in September. According to the CME FedWatch Tool, the probability of a rate cut by September is now 78%.

At the European Central Bank (ECB) Forum on Central Banking in Sintra, Fed Head Chairman Jerome Powell and ECB President Christine Lagarde discussed the monetary policy outlook. Powell remarked that services inflation tends to be more persistent and noted that wage increases are beginning to return to more sustainable levels, though they remain higher than where they are expected to settle in equilibrium. He also observed that the labor market is cooling off. Additionally, Powell suggested that inflation might return to 2% either late next year or the following year. In the discussion, Christine Lagarde acknowledged that inflation in the Eurozone is trending positively and noted that the central bank has made significant progress on the disinflation path. She added that there is no need for services inflation to be at 2%.

It seems that all of the above has had a positive impact on the markets which now consider the reduction of rates to be crucial, especially in the United States, where some macroeconomic indicators are beginning to show signs of economic exhaustion. The job market seems to have a bigger problem. ADP’s report on private sector employment for June revealed a rise of 150,000 jobs, which was below the anticipated 160,000. Weekly jobless claims came in at 238,000, higher than the predicted 235,000. Meanwhile, JOLTS job openings rose by 221,000 from the previous month to 8.140 million in May, exceeding expectations. Friday’s announcement of new jobs showed an increase of 206,000, which was above the 190,000 expected by markets but the unemployment rose to 4.1% which is the highest price of about three years.

The markets are also aware of the political uncertainty that has arisen in recent elections in France. In a surprising outcome, the French leftist alliance secured the most seats, pushing President Emmanuel Macron’s faction to second place and Marine Le Pen’s far-right party to third. The market response has been relatively subdued, as many believe that the political stalemate will hinder the left from implementing extensive spending initiatives. Of course, the markets also pay great attention to the US election, assessing the replacement scenario for Joe Biden, a possibility that has emerged recently.

As we said earlier, most major equity indices in Europe and the United States had a strong recovery, with a significant drop in bond yields as the U.S. ten-year bond closed on Friday a bit below 4.28%. The recovery was strong in most major commodities such as gold, copper, and oil. After the expectations from the Fed and the upcoming interest rate cuts, the big loser in the foreign exchange market was the US dollar while other currencies such as the euro and the Australian dollar had significant gains as we will see in detail below. In contrast, Bitcoin and most cryptocurrencies continued their downward path for the fourth consecutive week.

The week ahead is certainly dominated by the announcement of US inflation next Thursday. This outcome may affect the Fed and determine its next moves to a large extent. Also, in the US, Fed Chair Powell is set to testify before the Senate Banking Committee on the economic outlook and recent monetary policy actions. He will deliver a prepared statement, followed by a Q&A session with the committee. China also has important announcements such as inflation, imports, exports, and trade balance. The OPEC Monthly Market Report, due to be announced on Wednesday, will also be of significant value.




The US SP500 index was bullish last week as it closed at 5,563.77 points and profits of 1.60%. It was another profitable week for SP500 after some consolidations in the previous week which confirms that the trend remains undoubtedly bullish. We saw a new all-time high price on Friday. Although the NFPs results on Friday showed that the jobs market last month expanded more than expected, the rest of the US macro announcements had discouraging results. Manufacturing and services sectors, as expressed by the ISM PMI indicators were both in contraction last month. Also, the employment expressed by ADP and JOLTS had results below market expectations. This negative outlook of the US economy created a perception that the Fed won’t be able to keep the interest rates high for a long period. September is the month that gathers the highest probability for a rate cut. The rate-cut cycle is a strong motivation for the stock markets to anticipate profits. Last week, the technology stocks spearheaded the gains, with Tesla soaring 27.1% following better-than-expected second-quarter results. Other significant technology gainers were Apple, Meta Platforms, and Amazon. This week though, the inflation announcement may cause some turbulence, especially if the results show that the inflation insists. We may try short positions.



The German DAX40 index was bullish last week, closing at 18,475.45 points, with profits of 1.32%. The economic data released last week were not very positive for the German economy. Manufacturing, services, and composite PMIs were all well below market expectations. The factory orders dropped in May by 8.6% (YoY) while the industrial production fell 6.7% (YoY). The inflation in Germany, expressed by the Harmonized Index of Consumer Prices was announced at 2.5%, significantly below the 2.8% of the previous month. Still, the persisting inflation in the Eurozone area held back a possible optimism. However, the DAX40 had the third consecutive week in a row, based mainly on two factors. First of all, the expectations that the Fed will start soon the interest rate cut cycle, created a positive sentiment not only in the USA but in the global economic environment. Secondly, the political crisis in Europe after the recent election results in the European Parliament seems to be smoothed out.  The Labour Party’s victory in the UK election and yesterday’s result in the France elections may not have the most market-friendly results but at least, the uncertainty has been removed. Still, the German economy faces some significant issues: negative macro results, a high probability that the ECB will not continue aggressively with interest rate cuts, and a political crisis that may cause corrections in stock markets so we may try short positions this week.



The British FTSE100 index moved upward last week, closing at 8,210.5 points, earning about 0.38%. The Labour Party’s resounding victory in the UK parliamentary election marks a significant political shift, securing a decisive majority. Labour captured 412 seats, an increase of 211 from the last election, while the Conservatives plummeted to 120 seats, losing 250. Emphasizing economic stability, Labour has pledged to adhere to strict spending guidelines. This substantial win, coupled with assurances of stability, has contributed to the recovery of the UK stock markets. On the monetary policy front, markets are predicting a rate cut in August following the Bank of England’s decision to maintain steady interest rates in June, despite inflation dropping to the central bank’s 2% target. This week, crucial economic indicators such as GDP, industrial production, manufacturing output, and trade balance figures are set to be released, potentially impacting the economic outlook. FTSE100 has no obvious trend in the last four weeks, perhaps waiting for new fuel. The removal of the political uncertainty combined with possible macro results and the anticipation of interest rate cuts may create a new uptrend. We prefer long positions for the current week.



The previous week was bullish for gold, with the next month’s futures closing at $2,397.7 and profits of 2.48%. Despite Friday’s NFP results indicating stronger-than-expected job market growth last month, the remainder of the US macroeconomic announcements were disappointing. The unemployment rate increased to 4.1%, and employment figures from ADP and JOLTS fell short of market expectations. This negative economic outlook has led to the perception that the Federal Reserve may not be able to maintain high interest rates for an extended period. Markets’ perception is that the first interest rate cut may take place in September and it can be followed by a second cut in December. Gold prices were also favored by the weakness of the US dollar and the drop in bond yields. Next week’s trading is expected to be heavily influenced by the June US inflation report. If inflation comes in cooler than expected, it could bolster expectations for rate cuts. Additionally, Fed head Powell’s two-day Congressional testimony starting on Tuesday will be closely watched by the markets regarding the Fed’s future rate decisions. We may try long positions for one more week.


US Oil

Last week was bullish for oil with the next month’s futures closing at $83.16, with profits of 1.99%. This week, the primary driver of prices was a substantial reduction in U.S. crude inventories. According to the American Petroleum Institute, there was a 9.16-million-barrel decline in crude oil stocks and according to the US Energy Information Administration, there was a 12.16-million-barrel decline in weekly crude oil stocks. Those two metrics indicate a significant rise in the demand which boosted the oil prices. Also, last week, rising tensions in the Middle East reintroduced a geopolitical risk premium to oil prices. Concurrently, OPEC continues to bolster prices through ongoing production cuts, even as Nigeria and Iran slightly increased their output in June. This combination of geopolitical uncertainty and strategic supply management by OPEC has contributed to maintaining elevated oil prices. Additionally, market participants are closely monitoring the situation for any further escalations or policy shifts that could impact global oil supply and demand dynamics. There was a sharp rise in oil prices for four consecutive weeks and total profits of more than 10%. It will make sense if we see any corrections based on the overbought conditions and profit-taking actions so we will prefer short positions this week.



EURUSD (Euro US Dollar)
Last week was bullish for EURUSD as it opened at 1.0740 and closed at 1.0838. The exchange rate managed to trend upward for the second week in a row, surpassing 1.08, driven by dollar weakness after US jobs data showed a slowdown. This bolstered expectations for a Fed rate cut in September. In Europe, policymakers remain concerned about inflation trends despite recent rate cuts, fearing a divergence from the 2% target. The recent Eurozone inflation announcement raised some concerns after the Core Harmonized Index of Consumer Prices climbed to 2.9% last month, surpassing market expectations of 2.8%. As per the political situation, the French leftist alliance gained the most seats, relegating President Emmanuel Macron’s group to second place and Marine Le Pen’s far-right party to third. The other macro results in the Eurozone were not negative. The PMI for manufacturing was announced for last month at 45.8, above the 45.6 that markets expected, and retail sales rose by 0.3% vs 0.1% that markets estimated. The unemployment rate was unchanged at 6.4% in the Eurozone though. It seems that markets’ perception of the two central banks’ stance has changed lately: markets believe the Fed will probably start cutting interest rates as early as September since the U.S. economy and especially the job market cannot stand high interest rates for such a long time. They also estimate that the European Central Bank will not be so aggressive in lowering interest rates because inflation in the Eurozone seems to persist. This perception may create a new upward trend for EURUSD towards the 1.10 price zone and for this reason, we may try buy positions this week.


GBPUSD (Great Britain Pound – US Dollar)

Strongly bullish was the last week for GBPUSD, as it opened at 1.2649 and closed at 1.2814. It was the biggest weekly rise for the exchange rate in the past 2 months, driven mainly by political developments but also the economic environment in the UK. The Labour Party won the parliamentary election, securing a majority as expected. Laboθr has won 412 seats, 211 more than in the last election, while the Conservatives have secured 120 seats, losing 250 compared to the previous election. Emphasizing economic stability, Labour has committed to adhering to strict spending guidelines. The election victory with great comfort but also the winners ‘ assurances of stability helped the sterling recover. On the monetary policy front, markets anticipate a rate cut in August following the Bank of England’s decision to keep interest rates steady in June, even as inflation fell to the central bank’s 2% target. Important results for the UK economy are announced this week: GDP, industrial production, manufacturing, and trade balance. The trend is strongly upward and even if there is a significant resistance close to 1.29, we will prefer buy positions for one more week.


USDJPY (US DollarJapanese Yen)

USDJPY was neutral last week, opening and closing around 160.70 – 160.75. By Wednesday the exchange rate was continuing the strong upward trend, setting new multi-decade highs near 162. From then on, however, a corrective move began but the weekly price could not close below 160. The decline in the dollar was driven by disappointing US economic data, reinforcing expectations that the Federal Reserve might start cutting interest rates as early as September. Concerns about another Japanese government intervention also influenced the currency, as the authorities seemed to support the yen after the USDJPY breached the 160 level. The yen remains pressured by significant rate differentials between Japan and the USA. Additionally, the Bank of Japan’s lack of urgency to normalize monetary policy weighed on the yen, although there is growing speculation that the BoJ could raise rates at its next policy meeting in late July. The most important announcement of the Japanese economy last week was the Tankan manufacturing index, which was announced to strengthen compared to the previous month. The uptrend seems unbeatable for the moment so we will try buy positions for one more week.


EURJPY (EuroJapanese Yen)
Bullish was last week for EURJPY which opened at 172.61 and closed at 174.25. The exchange rate continued its upward trend for the third week in a row, marking new historical highs of several decades. The euro strengthened significantly last week due to the slight resurgence in inflation that we saw through the announcement. This has put the markets in mind about the future actions of the European Central Bank since they now believe that it will not be able to be so aggressive in cutting interest rates. On the other hand, the yen remains weak as the Bank of Japan’s very low interest rates create interest differences with other central banks and an incentive to convert the yen into other currencies. Unless something important changes, the upward trend will probably continue and therefore we will choose buy positions for one more week.


EURGBP (Euro – Great Britain Pound)

Last week was bearish for the EURGBP, as it opened at 0.8487 and closed at 0.8457. Both the euro and sterling were significantly boosted last week each for their own reasons. The euro has strengthened due to markets ‘ belief that the European Central Bank will not continue aggressively cutting interest rates as inflation in the Eurozone seems to persist.  But Sterling appears to have strengthened even further as the result of the recent elections in the United Kingdom brings political stability. Also, Labour’s election-winning statements do not raise concerns in the markets about economic stability and fiscal discipline. Maybe the markets will digest soon the results of the UK elections and the macros & central bank decisions will be in the spotlight again. We may try buy positions this week.


USDCAD (US Dollar – Canadian Dollar)

Bearish was the last week for USDCAD, as it opened at 1.3668 and closed at 1.3641. The exchange rate has completed four consecutive weeks of decline since, particularly last week, most of the factors pointed to this move. The U.S. dollar weakened sharply after the latest negative macroeconomic results in the United States suggested that the Fed should start cutting interest rates earlier, perhaps in September. The rise in oil prices over the past month has supported Canada’s economy as it is the country’s most important export commodity. The fall in the exchange rate, however, was held back by some negative results for Canada’s economy. The unemployment rate in Canada last month climbed to 6.4% from 6.2% with a negative labor market balance while manufacturing also found itself in negative territory. While Canada does not have the results to support its currency, the weakness of the U.S. dollar has created a downward trend that can continue for this reason we may try sell positions this week.


USDCHF (US DollarSwiss Franc)
The USDCHF was bearish last week as the opening price was at 0.8967 and the closing price was at 0.8956. Switzerland’s inflation rate dropped to 1.3% in June, down from 1.4% in the previous month, coming in lower than anticipated. Last month, the Swiss National Bank reduced its key interest rate by 0.25% and Swiss policymakers are diverging from major counterparts like the Federal Reserve and the European Central Bank, which remains cautious about further lowering the interest rates. Meanwhile, the dollar has been trending downward during the last week, driven by growing speculation that the Fed will reduce borrowing costs this year. The Swiss economy had some negative results on the economic announcements last week which did not leave the USDCHF to develop a stronger downtrend. More specifically, retail sales rose by 0.4% last month while markets expected a 2.5% rise, and the SVME Purchasing Managers’ Index was announced at 43.9, significantly lower than the 46.4 of the previous month. It seems that the USD is in a bearish trend due to the expected interest rate cuts by the Fed so we will prefer sell positions for the current week.


AUDUSD (Australian Dollar – US Dollar)

Bullish was the last week for AUDUSD, which opened at 0.6678 and closed at 0.6749. The minutes from the Reserve Bank of Australia’s (RBA) June monetary policy meeting, released on Tuesday, revealed that the board found a stronger case for keeping rates unchanged. It seems that the RBA is moving in the opposite direction from the Fed which may start reducing interest rates in September. This divergence between the two central banks created a strong uptrend for the AUDUSD. The other macro announcements from Australia had a mixed sign. Manufacturing PMI indicator was announced below market expectations but the result of the services PMI exceeded the estimations. Retail sales rose last month by 0.6% vs 0.2% that the markets expected but the trade balance was announced at 5.77 billion in May, missing the target of 6.67 billion. In China, the sign was also mixed. Caixin manufacturing PMI was announced at the impressive 51.8 but services PMI failed to meet the expectations. The inflation that persists in Australia may lead the RBA not to intervene for a long period while the Fed may start the cut-rate cycle soon. If this perception prevails in the markets, the uptrend will carry on so we may try buy positions for one more week.




Last week, Bitcoin was heavily bearish and closed at $55,829 with losses of 10.92%. The German government’s Bitcoin transfers and the repayments from Mt.Gox have stirred uncertainty among the crypto community. Mt. Gox is preparing to repay its creditors with over 141,000 Bitcoins, a decade after its collapse. Investors will receive Bitcoin at a value much higher than it was at the time of the 2014 collapse. Markets anticipate that, after waiting ten years, Mt. Gox creditors are likely to cash in their holdings. During the last week, Bitcoin derivatives traders have endured over $226 million in liquidations in a single day, as per Coinglass data. This marks the second-largest Bitcoin liquidation event ever, surpassed only by the fallout from the FTX exchange collapse. Cryptocurrencies and Bitcoin were not able to follow the uptrend of the traditional markets especially the impressive rise of tech stocks like Nvidia which are strongly connected with the crypto asset class. It means that cryptos are facing serious issues. Last week’s lowest price was close to $53,500 and there’s no obvious strong support for the downtrend until the price zone of $38,500. We may try short positions for one more week.



The information in this report is of a general nature only. It is not a piece of personal financial advice. It does not take into account your objectives, financial situation, and personal needs.

a-Quant is not responsible for your actions and recommends you contact a licensed financial advisor before acting on any information contained in this general information report.

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