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OANDA – US Markets on Holiday After Record, Oil Higher on Drawdown and Gold Rebounds

July 8, 2019 Business News No Comments Email Email

The US dollar is mixed against major pairs. Commodity currencies appreciated against the greenback, while the dollar gained against the CHF, EUR and GBP. markets will be close for the US independence holiday, but it will be a short break for the market that will get back to their trading screens for the release of the June employment report to be published on Friday.

Low volumes are expected on Thursday with the US on holiday and little on the economic calendar, this contrasts Friday that will start the North American session with a bang, with US and Canadian employment data at 8:30 am.

STOCKS – US Stocks Hit New High Ahead of Short Trading Session

US stocks posted another record as central bank stimulus is boosting equities. The biggest challenge for global equities to keep rising will be economic strength of the major economies. Central banks are ready to keep rates low to avoid growth losing momentum, but if economic indicators start showing signs that a recession is inevitable, consumer and investor confidence would suffer.

The US non-farm payrolls (NFP) report to be published on Friday is expected to rebound from last month’s disappointment, but if the ADP is any indication it could be another disappointment triggering more red flags of economic uncertainty.  The market is now pricing in a Fed rate cut at 100 percent with the biggest debate on if it will be a 50 or 25 basis points. The ISM manufacturing PMI also showed a slowdown of the services industry and is now at a 2-year low.

OIL – Crude Higher on Lower US Crude Inventories

Oil prices rebounded on Wednesday ahead of the July 4th weekend. The API delivered another drop in inventories with crude falling by 5 million barrels. The EIA weekly report showed a similar drawdown with crude stock shrinking by 1.1 million barrels and gasoline by 1.6 million.

West Texas Intermediate gained 2.06 percent and Brent 2.53 percent, but the two are still in the red on a weekly basis by more than 1 percent despite the best efforts of the OPEC+. The meeting at the G20 between Presidents Trump and Xi was not a success, and with declining economic indicators and more trade battles gearing up, energy demand is under pressure.

Oil prices have been caught between the OPEC+ deal and the threat of a global recession as trade wars are on the rise.

GOLD – Gold Rebounds as Trade Hopes Fade

Gold rose 0.89 percent on Wednesday. The yellow metal remains trading above $1,400 as the G20 trade optimism started to dissipate. Weak global manufacturing and comments from US officials on the length and difficulty of the US-China deal put gold back in play as a safe haven.

The G20 did not yield a concrete trade deal between the US and China and with President Trump rushing to another trade dispute this time against the European Union, gold is once again the preferred safe haven.

Next up for the gold rally is the US employment report on Friday, nothing short of an incredible number of jobs and wages over the forecast will be enough to dampen the Fed interest rate cut narrative that is keeping the yellow metal on the rise.

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