Dollar and US stocks post modest gains ahead of big week or data, earnings and the ECB

Wait and see mode is what most market participants are showing this Monday.  US major indexes are flirting with positive sessions after optimism grew on the trade front and as US leaders neared a potential US budget deal.  With market optimism rising as US and Chinese leaders seem poised to resume face-to-face talks next week in Beijing, investors are hopeful we will not see President Trump return to his alter-ego ‘tariff man’.  Fed followers will now enjoy a blackout period and wait for the last major piece of data, Friday’s advance second quarter GDP reading.  The market is firmly pricing in a 25-basis point cut at the end of July meeting, but if we see a sub 2.0% GDP reading, we could see the data-dependant Fed have enough of a catalyst to deliver a 50-basis point cut. 

All three major US indexes are slightly positive and the dollar is posting small gains to the euro, pound, yen and loonie.  The euro could see some tight ranges ahead of Thursday’s rate decision.

Oil

Energy traders are buying up oil as geopolitical risks run high and expectations grow that we could see the US begin escorting oil tankers in the Persian Gulf.  Global growth concerns may get alleviated this week, if we see some stabilization with global PMI data.  US crude inventories have been rather bearish, but this week expectations are for a strong draw and overall bearish report. 

Oil could see some support as Libyan crude output dropped to the a five-month low as an unidentified group closed the country’s largest valve. Libyan production is now around 1 million barrels a day after the force maneuvers at Sharara lowest just under 300,000 barrels a day. 

Gold

Gold’s rally will look for earnings to deliver softer outlooks and for tensions to remain high in the Persian Gulf.  The main driver for the recent runup has been dovish Fed expectations and we could see the yellow metal struggle for a sustained move before the end of month FOMC meeting.  Possible progress on the trade front has hampered gold’s gain in the past, but markets are starting to become very skeptical for a final deal to emerge anytime soon. 

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Ed Moya

Ed Moya

Senior Market Analyst - The Americas at OANDA
With more than 20 years’ trading experience, Ed Moya is a market analyst with OANDA, producing up-to-the-minute fundamental analysis of geopolitical events and monetary policies around the world. Over the course of his career, he has worked with some of the world’s leading forex brokerages and research departments including Global Forex Trading, FX Solutions and Trading Advantage. Most recently he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including BNN, CNBC and Bloomberg, and is often quoted in leading publications including the Wall Street Journal and the Washington Post. He holds a BA in Economics from Rutgers University.
Ed Moya