RBA Rate Decision: The Reserve Bank of Australia is set to announce its interest rate decision and monetary policy statement, which could have a significant impact on the AUD.
CAD Labour Market Figures: Canada’s Employment Change and Unemployment Rate data will be closely watched to gauge the health of the Canadian labor market.
US Economic Data: Key indicators including ISM Services PMI and Final Services PMI, which provide insights into the economic outlook.
Now What?
As we head into the first full week of August, markets are poised for potential volatility driven by key central bank decisions and critical economic data releases. The focus will be on the Reserve Bank of Australia’s interest rate decision, where no change is expected, but the accompanying statement will be scrutinized for hints about future monetary policy.
The Reserve Bank of Australia (RBA) is expected to maintain its cash rate at 4.35% during its upcoming meeting. This decision reflects the current balance the RBA is trying to strike between managing persistent inflation and avoiding further economic slowdown.
Inflation remains above the RBA’s target range, driven by factors such as rising house prices and robust wage growth. However, there are signs of a slowing economy, with weak GDP growth and concerns over consumer spending and investment.
The market has largely adjusted its expectations, with fewer rate cuts anticipated in the near future. Some forecasts even suggest that rates could stay higher for longer than initially expected.
The RBA’s decision to hold rates could stabilize the Australian dollar, which has seen volatility in response to recent rate changes. However, the outlook remains uncertain, with future rate cuts possible if economic conditions deteriorate further.
Meanwhile, Canadian labor market figures will provide insights into the country’s economic resilience, especially as the Bank of Canada has been weighing the impacts of high-interest rates on the economy.
In the US, the Services PMI data will offer a glimpse into the non-manufacturing sectors’ health, while bond markets will continue to react to the evolving inflation narrative and Federal Reserve’s rate policy outlook. With the 10-year Treasury yield hovering around 3.97%, market participants will be closely monitoring any signals from the Federal Reserve regarding future interest rate paths, especially as inflation shows signs of softening.
Market Events and Announcements:
The times below are GMT +3.
Monday, August 5, 2024:
4:45 PM – USD Final Services PMI (Previous: 56.0)
5:00 PM – USD ISM Services PMI (Previous: 48.8)
Tuesday, August 6, 2024:
7:30 AM – AUD Cash Rate and RBA Monetary Policy Statement (Previous: 4.35%, Forecast: 4.35%)
The US 10-Year Treasury bond yield has shown significant movements, currently hovering around 3.97%. It has faced resistance around the 4.15% level, which it has struggled to breach sustainably. With some easing in inflation pressures anticipated and economic growth projected to slow, there is a general consensus that yields may decrease modestly toward 3.75% by the end of 2024.
However, any unexpected inflationary pressures or significant changes in Federal Reserve policy could alter this trajectory.
Key Levels:
Support: 3.75%, 3.56%
Resistance: 4.15%, 4.25%
Impact of Upcoming Events:
US Economic Data: Weaker-than-expected Services PMI or higher-than-expected unemployment claims could drive demand for Treasuries, further reducing yields.
Chart 2: Dow Jones Industrial Average (DJIA)
The Dow Jones Industrial Average (DJIA) has recently been experiencing a period of volatility, with the index currently around 40,348 points, having dropped by 1.21% in recent trading sessions. Given the current technical setup and fundamental backdrop, the Dow Jones Industrial Average may continue to face downward pressure in the short term, with potential support around the 40,000 level. If the index breaks below this level, it could test lower support levels, possibly around 39,500 or even 38,500 in a more extended correction.
On the other hand, if market sentiment improves, particularly with favorable earnings reports or economic data, the index could attempt a recovery towards the 41,000 – 41,500 range.
Key Levels:
Support: 40,000, 39,500, 38,500
Resistance: 41,000, 41,500
Impact of Upcoming Events:
US Services PMI and Unemployment Claims: Negative surprises could weigh on market sentiment, leading to further declines in the DJIA.
Global Economic Data: Mixed signals from global markets, including China’s CPI and PPI, could add to the volatility.
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