Asset Summary – Wednesday, 13 August
GBPUSD experienced upward pressure following unexpectedly positive UK employment data, suggesting resilience in the labor market despite recent tax increases. While unemployment remains elevated, the smaller-than-anticipated payroll decline and upward revisions to previous losses alleviated concerns about significant labor market deterioration. However, persistent wage growth above the Bank of England’s target level presents a challenge, potentially complicating future monetary policy decisions. Upcoming GDP figures indicating minimal growth and external factors like the US-China tariff pause extension and a potential US-Russia peace deal regarding Ukraine add layers of complexity that could introduce volatility, but the labor data is likely to support the pound in the near term.
EURUSD’s future direction is uncertain given conflicting factors. The potential for a resolution in the Ukraine conflict could reduce geopolitical risk, while US President Trump’s meeting with Russian President Putin is a key event to watch. Anticipation of Federal Reserve rate cuts in the US may weaken the dollar, potentially boosting the euro. The ECB’s recent halt to its easing cycle offers some support to the euro, although the possibility of a further rate cut before year-end creates uncertainty. Euro area GDP growth and stable inflation provide a mixed picture, with the threat of US tariffs on European goods adding downside pressure to the euro.
DOW JONES is positioned to potentially maintain its upward trend, although with limited immediate movement. The positive close in the previous session, alongside the S&P 500 and Nasdaq, suggests underlying market strength. Easing inflation concerns and the increased likelihood of a Federal Reserve rate cut are supportive factors, fostering a favorable investment environment. Moreover, the extension of tariff pauses on Chinese goods removes a potential headwind, contributing to market stability. However, individual company performances, as seen with the negative reactions to Cava and CoreWeave’s earnings, could introduce some volatility, potentially offsetting the broader positive sentiment for the Dow Jones.
FTSE 100 is demonstrating positive momentum, fueled by strong individual company performance and macroeconomic factors. Spirax’s impressive earnings report and positive outlook instilled confidence in the market, while gains in the mining sector, driven by renewed US-China trade optimism and anticipated metal demand, further supported the index. Financial institutions and oil companies with exposure to China benefited from improved market sentiment and rising crude prices. Furthermore, better-than-expected UK jobs data contributed to the positive trend, suggesting a more stable economic environment than previously anticipated, despite a slight moderation in private-sector wage growth. Overall, these factors point towards continued, though potentially moderate, growth for the index.
GOLD is reacting positively to the latest inflation data, as the lower-than-expected headline figure suggests the Federal Reserve is more likely to cut interest rates in September. This prospect diminishes the attractiveness of interest-bearing assets, making non-yielding gold a more appealing investment. However, uncertainty regarding potential tariffs on gold imports creates a mixed outlook. While the President has signaled no levy, conflicting customs classifications introduce volatility. The extension of the US-China tariff truce and upcoming US-Russia talks could provide some stability, but upcoming economic data releases like PPI, jobless claims, and retail sales will be critical in shaping market sentiment and influencing gold’s price trajectory.