Macro Matters – Weekly review, w/c July 31

Macro Matters – Weekly Review, w/c July 31

Macroeconomic / Geopolitical Developments

• Major Central Banks Move Closer to Their Terminal Rates:

The Fed and ECB raised rates by 25 basis points last week, signalling that their tightening cycles are nearing an end. Falling inflation and improving growth prospects in the US bolster hopes for a soft landing, while the ECB faces weakening activity indicators alongside easing inflation.

• Subdued Volatility Amid the Summer Lull:

With July’s FOMC meeting concluded, volatility gauges across asset classes have softened, reflecting a typical summer trading environment. The VIX Index remains low, while bond and currency volatility indices signal limited immediate market impact from economic data releases.

United States

• The Importance of Economic Data:

The Federal Reserve’s data dependence shifts focus to key metrics, with Nonfarm Payrolls and ISM data in the spotlight this week. Easing inflation and a resilient labour market support expectations of a Fed pause, boosting sentiment for US index futures.

• Earnings Take a Backseat:

Despite strong earnings from major tech companies like Microsoft, Alphabet, and Meta, markets are more focused on economic indicators. Upcoming results from Apple and Amazon could still influence sentiment, though near-term market movements hinge on macroeconomic trends.

Europe

• Bank of England’s Upcoming Decision:

Inflation trends in the UK have provided the BoE with room to opt for a smaller 25bps hike this week, reducing pressure on sterling. A more aggressive stance, however, could trigger GBP gains.

• Eurozone Data Watch:

The ECB’s less hawkish tone has softened the euro, and upcoming GDP and inflation data will be key for market sentiment. Any downside surprises could weigh further on the EUR.

Asia

• Bank of Japan Eases Yield Curve Control:

A subtle shift by the BoJ towards policy normalisation has supported the JPY. Adjustments to bond-buying limits signal a more flexible approach, with implications for global currency markets.

• Chinese Stimulus Measures:

China’s promises of economic support are raising market hopes, though concrete details are still awaited. Plans to address property sector debt and boost consumption could stimulate risk assets if executed effectively.

Commodities

• Oil Futures Maintain Momentum:

The positive outlook for oil continues, supported by demand optimism and supply constraints. With resistance at $83.53 in sight, any pullback may offer buying opportunities.

• Gold Futures Struggle Amid USD Strength:

Gold prices have fallen as the USD rallies, with resistance forming at $1978/$1983. A hold above $1931/$1938 support is critical for avoiding further declines.

What’s Next?

• Economic Data: Nonfarm Payrolls and ISM data in the US, alongside Eurozone inflation and GDP figures, will dominate the week.

• Central Bank Decisions: The Bank of England and Reserve Bank of Australia are expected to announce rate updates, with the latter likely to hold rates steady.

• Corporate Earnings: Apple and Amazon lead the final stretch of earnings season, alongside key reports from the pharmaceutical and oil sectors.

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