Stock markets are marginally negative on Tuesday, with US retail sales data weighing slightly after initial volatility passed.
The numbers were much weaker than expected for June but then the May figures were revised up so it wasn’t all bad. I’m not convinced today’s data really changes things as far as the consumer or economy is concerned, all things considered, nor has it really changed anything on interest rate expectations, with markets almost fully pricing in a hike next week and probably no more after that.
RBA undecided on future rate hikes
It’s safe to say there’s quite a balanced debate taking place at the Reserve Bank of Australia right now, with policymakers torn on whether conditions have become restrictive enough and if a little more will do more harm or good.
While markets appear confident that the RBA will hike once more this year, when that will come is far less clear. And as we’ve seen so much this year, expectations have a knack of changing quite considerably over a matter of weeks, let alone months. In other words, investors are no more certain than the policymakers themselves.
Oil turns higher again despite difficult start to the week
Oil prices are edging higher after falling in the last couple of sessions. There may have been an element of profit-taking to the move having rallied by more than 13% in a little over two weeks prior to Friday. But the data from China yesterday won’t have helped either, and neither will reports from Libya of outages being restored.
What is interesting is where the price ran into support and whether that will continue to hold. Since early May, $77-$78 was a major barrier of resistance for Brent and the breaking of that was therefore very significant. Should that now become a barrier to the downside instead, it could reinforce the bullish narrative.
Gold choppy after retail sales but holding key support
Gold is drifting higher again after briefly paring gains over the last couple of sessions. The price pulled back from $1,960 where it was running into resistance but fell just short of testing $1,940 as a new area of support. The yellow metal has been buoyed by lower yields and a softer dollar, both of which we’re seeing again today.
Today’s moves have pushed gold above $1,960 to hit a near-six-week high. Yields and the dollar have been volatile in the aftermath of the retail sales data which has been reflected in gold but we haven’t seen it commit one way or another yet. A hold above $1,960, where it is currently close to testing, could be viewed as a bullish confirmation signal, with $1,980 potentially being the next test above.
A psychological blow for bitcoin
Bitcoin has slipped back below $30,000 after coming under pressure at the start of the week. It’s been a very uncertain period for cryptos, with regulatory issues front and center of that, although the ETF filings did counter that at one stage. Broadly speaking, price action is choppy but still broadly within the range it’s traded within since 22 June. The moves over the last 24 hours could be a psychological blow but it’s not clear whether it’s anything more than that at this stage.
For a look at all of today’s economic events, check out our economic calendar: www.marketpulse.com/economic-events/
Craig Erlam, Senior Market Analyst, UK & EMEA, OANDA
