Key talking points
- Apple gets a positive lift after iPhone demand for iPhone surges 52%.
- EUR/USD, GBP/USD benefits from a sluggish USD. Focus shifts to Euro Area inflation and US Core PCE on Friday.
- Copper bounces back above 10,400 while Gold, Silver remain cautious.
USD has been struggling to maintain its strong bullish momentum this week, supporting many of its correlated assets (assets that trade against USD). With EUR/USD and GBP/USD enjoying three consecutive days of gains, USD/JPY has remained in a relatively tight range below 157.00 as investors wait for more clues on the interest rate trajectory for both economic powerhouses.
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Similarly, Europe, the Bank of England and the United States are set to hold their rate decisions next month, with focus shifting to when rate cuts will begin. This comes at a time where inflation remains above the respective central bank’s target rate of 2% while the labour market has remained resilient.
As the ECB prepares for its meeting next week and the Fed the week after, inflation and employment data remain a key focus for policymakers. So far, interest rate expectations have been a prominent driver for this pair, which places a lot of focus on Euro Area inflation and US Core PCE (the Fed’s preferred measure on inflation) scheduled for release on Friday.
Economic calendar - 31 May 2024
| Time (UTC) | Region | Event | Previous | Forecast |
|---|---|---|---|---|
| Friday 31 May | ||||
| 01:30 | China | NBS Manufacturing PMI (May) | 50.4 | 50.5 |
| 06:45 | France | Inflation Rate YoY Prel (May) | 2.20% | 2.40% |
| 08:00 | Italy | GDP Growth Rate Final YoY Final (Q1) | 0.70% | 0.60% |
| 09:00 | Euro Area | Core Inflation Rate YoY Flash (May) | 2.70% | 2.80% |
| 09:00 | Italy | Inflation Rate YoY Prel (May) | 0.80% | 0.80% |
| 12:30 | Canada | GDP Growth Rate Annualised (Q1) | 1.00% | 2.20% |
| 12:30 | United States | Core PCE Price Index YoY (April) | 2.80% | 2.80% |
| 12:30 | United States | PCE Price Index YoY (April) | 2.70% | 2.70% |
EUR/USD technical levels
From a technical standpoint, the three days of consecutive gains has allowed bulls to push above 1.085 (prior resistance now support), in an attempt to retest 1.090.
Chart prepared by Tammy Da Costa, CFTe
But although there is still uncertainty surrounding the global economic backdrop, equity indices have continued to gain traction. For Germany 40, many of the stocks have benefited from an increase in sentiment and the possibility of a rate cut next week which drove the major European index to a fresh-record high (current resistance) of 18,940 last week.
Chart prepared by Tammy Da Costa, CFTe
Similarly, major US indices, SPX500, US30 and the US tech 100 have also reached record highs this month, thanks to robust earnings and a sluggish Dollar. For US 100 and SPX 500, Nvidia’s earnings played a major role in the recent price surge and is still assisting in keeping the momentum of the uptrend in check. But another stock that has received positive news is Apple, with recent figures showing China’s iPhone demand rising 52%. This could provide another positive catalyst for the stock in today’s session.
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Today’s current price action:
Source: Bloomberg
For Gold, Silver, there has been a minor pullback in prices today, preventing XAU/USD from clearing the 14.40% Fib retracement of the Oct 2023 - May 2024 high, holding resistance around the $2,360 mark.
Chart prepared by Tammy Da Costa, CFTe
Another factor to consider for FX and global markets is the upcoming elections that are expected to occur for a large number of countries. For emerging markets all eyes are on the South African elections, set to take place tomorrow which is likely to contribute to volatility and price moves for USD/ZAR. As Africa’s largest economy continues to battle with corruption, power outages, water shortages and high unemployment, this election is one of the most controversial and critical one’s since the end of Apartheid in 1994. Meanwhile, for GBP/USD, the UK elections in July could also contribute significantly in the week’s ahead.
