August 1st financial breakfast: Gold prices hit their best monthly performance in four months, and the market expects the rate hike cycle to come to an end

On August 1, the dollar rose on Monday as a Federal Reserve survey showed that U.S. banks reported tighter credit standards and weaker demand for loans in the second quarter, indicating that rising interest rates were having an impact on the economy. Gold prices rose to their best monthly performance in four months, helped by expectations that the world's major central banks are nearing the end of their rate hikes.

On Monday (August 1), Beijing time (August 1), the dollar rose on Monday as a Federal Reserve survey showed that U.S. banks reported tighter credit standards and weaker loan demand in the second quarter, indicating that rising interest rates are having an impact on the economy. Gold prices rose, posting their best monthly performance in four months, helped by expectations that the world's major central banks are nearing the end of their rate hikes.

Commodity closing situation:U.S. gold futures ended 0.5 percent higher at $2009.20. More actively traded October Brent crude oil futures rose 1.2 percent to settle at $85.43 a barrel. September Brent crude futures, which expired at settlement on Monday, rose 0.7 percent to settle at $85.56 a barrel. U.S. crude futures rose 1.5 percent to $81.80 a barrel.

US stock market closing:The Dow Jones index closed up 0.28% at 35,560.19; the S & P 500 index closed up 0.18% at 4,590.26; the Nasdaq Composite index closed up 0.21% at 14,346.02.

Tuesday ForwardPrecious metal

Gold prices rose on Monday, posting their best monthly performance in four months, helped by a weaker dollar and expectations that the world's major central banks are nearing the end of their rate hikes.At the same time, the dollar index fell for a second month in a row, and recent data showed signs of cooling U.S. inflation, which has increased expectations that the Federal Reserve is closer to ending its fastest round of interest rate hikes since the 1980s.

According to CME's FedWatch tool, there is a 60 per cent chance that the Federal Reserve will leave interest rates unchanged this year. "I don't think the Fed will move in September, but later in the year, if we continue to get strong economic data, the Fed is likely to raise rates again," said Jim Wyckoff, senior market analyst at Kitco. "Right now, the gold and silver markets are waiting for the next catalyst... If Chinese demand starts to recover, we think there will be more upside for gold and silver."

Matt Simpson, senior analyst at City Index, said: "The market is correct in its assessment that Fed rates are at or near the end point and key inflation reports in the US all point to an acceleration in the pace of the inflation slowdown."

Elsewhere, silver rose about 1.8 per cent to $24.77 an ounce. Platinum rose 1.8 per cent to $952.55 and palladium climbed 3.1 per cent to $1,284.05.

crude oil

Oil prices hit a three-month high on Monday and recorded their biggest monthly gain since January 2022, helped by signs of tightening global supply and growing demand for the rest of the year.Saudi Arabia is expected to extend its voluntary production cut of 1 million barrels per day by another month to the end of September. The survey released on Monday showed that Saudi production fell by 860,000 barrels per day in July, and the overall output of the Organization of the Petroleum Exporting Countries (OPEC) fell by 840,000 barrels per day.

Edward Moya, analyst at OANDA, said: "Crude ends a solid month at a high level, the demand outlook remains impressive and there is no doubt that OPEC + will keep the market tight."

Oil inventories have also started to fall elsewhere, particularly in the United States, where the government has begun to fill its strategic petroleum reserve, which is at its lowest level in decades. Five analysts surveyed on Monday estimated that U.S. crude inventories fell by about 900,000 barrels in the week ending July 28.

Goldman Sachs estimated that global oil demand rose to a record 102.80 million barrels per day in July and raised its forecast for demand growth in 2023 by about 550,000 barrels per day, as forecasts for economic growth in India and the United States were upgraded, overshadowing the impact of lower expectations for Chinese consumption.

foreign exchange

The dollar rose on Monday as a Federal Reserve survey showed that U.S. banks reported tighter credit standards and weaker demand for loans in the second quarter, indicating that rising interest rates are having an impact on the economy.The Federal Reserve's quarterly Senior Loan Commissioner Opinion Survey (SLOOS) also showed that banks expect to tighten standards further for the rest of 2023. "Of course, in a rate hike environment, you would expect lending standards to tighten and demand to fall at the same time," said Marc Chandler, chief market strategist at Bannockburn Global Forex in New York. The dollar index, which measures the dollar against six major currencies, rose 0.24%, little changed at the beginning of the session.

Chandler said Friday's June unemployment report was likely to be strong, while next week's June consumer price index could show the first annual increase in inflation, "which some people think is just the tip of the iceberg. Gasoline prices are going up."

Friday's non-farm payrolls data will be the first of several data points to shape the Fed's decision on interest rates at the end of September, ahead of central bank leaders attending a Federal Reserve symposium in Jackson Hole, Wyoming, on August 24-26 that will focus on structural changes in the global economy.

Joe Manimbo, senior market analyst at Convera in Washington, said: "We'll have to see if the U.S. data continue to reflect the resilience of the U.S. economy, and if so, at least help the dollar hold steady between now and Jackson Hole."

The euro rose in early trading before retreating after data showed faster growth and lower inflation in Europe. It was down 0.15 per cent at $1.0998 in late trading in New York.

The Bank of Japan eased its grip on interest rates last week, and the yen continued its decline, but the yen was still on track for its first monthly gain against the dollar since March.

The dollar rallied 0.77% to 142.240 against the yen in late trading after the Bank of Japan's new intervention on Monday. The yen was rocked sharply on Friday as traders tried to assess the impact of the Bank of Japan's ultra-low interest rates, increased flexibility in its bond yield curve control (YCC) policy, and loosened its grip on the upper limit on long-term interest rates. The Bank of Japan's policy of holding yields down has weighed heavily on the yen over the past year, and Monday's new intervention suggests it may continue to do so.

Yields on Japan's benchmark 10-year government bonds rose to a nine-year high, prompting the Bank of Japan to make additional purchases to slow the rise in yields. The dollar fell against the yen for the first time since March and fell for a second straight month against the euro and sterling. Data on Friday showed that annual US inflation in June was the lowest in more than two years, and core price pressures eased, easing pressure on the US FOMC to continue raising interest rates.

The euro rallied earlier as data showed that inflation in the euro zone fell further in July, while the euro zone resumed growth in the second quarter of 2023, expanding more than expected.

The euro posted a monthly gain of about 1 per cent. Last week's European Central Bank policy meeting raised the prospect of a pause in interest rate rises in September, although analysts at Rabobank said Monday's data "allows the ECB to argue for a longer period of inaction or another rate hike".

Ahead of the Bank of England's policy meeting on Thursday, sterling fell 0.12% to $1.2835, a 1.3% monthly gain, with markets pricing in a similar chance of a 25 or 50 basis point rate hike.

Market News

National Australia Bank: The Reserve Bank of Australia is not expected to raise interest rates in August

National Australia Bank adjusted its rate-hiking expectations for the Reserve Bank of Australia after the release of second-quarter inflation data last week, and they do not expect the Reserve Bank of Australia to raise interest rates in August. Analysts at National Australia Bank said that service sector inflation remained stubbornly high, which in itself increased the risk that inflation would not return to its 3% target within a reasonable time frame. This does not even take into account the likely rise in prices for many other services in the September quarter. They said they would continue to monitor the latest data on the economy's response to rate hikes so far.

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US election poll: Trump leads with 54% support, surpassing DeSantis with 37%.

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