NAGA Weekly Recap May 6 - 2024 – May 10 - 2024

Over the past week, financial markets were focused on the Bank of England's decision to maintain the interest rate at 5.25%, but with clear signals of a potential cut in the near future. Additionally, news regarding gold, movements in the Australian Dollar, and stocks were also notable highlights.

Dive deeper into the details of these market movers and shakers!

Bank of England keeps interest rates at 5.25% but hints at a June cut

The Bank of England hinted at a rate cut this summer should inflation remain subdued, maintaining borrowing costs at a 16-year high of 5.25 per cent. Governor Andrew Bailey indicated that a rate cut at the next meeting in June was not off the table, highlighting the likelihood of rate reductions in the coming quarters, potentially more than what is currently priced into market rates. Traders anticipate two 0.25 percentage point cuts by December.

Consequently, the GBP/USD pair sees slight gains near 1.2525 during the Asian session on Friday, rebounding from lows of 1.2445 following the Bank of England's dovish stance.

Investors are closely watching how this potential rate cut could impact asset prices and economic stability in the near future.

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Dow Jones pops for 7th straight day

US stocks surged, marking the Dow Jones Industrial Average's seventh consecutive trading session of gains, with an increase of about 0.9% or nearly 350 points. The rise was fueled by indications of a cooling US labor market, reigniting expectations for a rate cut by autumn.

The market displayed signs of a broadening rally, with Real Estate and Utilities leading sector performance. However, Technology and Communications Services, which had been leading sectors in the past year, were the only areas to lag behind the S&P 500.

Initial weekly jobless claims data released on Thursday showed an increase of 22,000 from the previous week, reaching 231,000 — the highest level since August.

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Gold price extends the rally despite hawkish Fedspeak

Gold prices gained momentum, defying a modest rebound in the US Dollar. The yellow metal edged higher as many economists anticipate a weakening labor market could prompt the Federal Reserve to cut interest rates sooner than previously expected, in a bid to stimulate economic growth.

On Thursday, gold staged an interesting comeback as buyers continued to defend the $2,300 area. Initially, XAU/USD fell during the first half of the day as the US Dollar benefited from a negative market sentiment. However, the Greenback reversed its course ahead of Wall Street’s opening following the release of the US Initial Jobless Claims report for the week ended May 3. The report, which revealed a jump in seasonally adjusted initial claims to 231,000 — the highest level since August 2023 — revived optimism in the markets as it signaled a softening labor market. Consequently, stock markets surged while the US Dollar retreated.

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Australian Dollar holds firm amidst data and Fed sentiment

The Australian Dollar hovers above the psychological level of 0.6600. Thursday's rally was propelled by soft US Initial Jobless Claims, suggesting a more dovish stance from the Federal Reserve (Fed). This offset pressure on the Aussie Dollar stemming from the Reserve Bank of Australia (RBA)'s less hawkish stance, particularly in light of higher-than-expected inflation figures.

Australian inflation moderated to 3.6% in the first quarter from 4.1% in the previous quarter, marking the fifth consecutive quarter of deceleration. However, it outpaced forecasts of 3.4%. Additionally, the March Monthly Consumer Price Index (YoY) surged to 3.5%, surpassing expectations of 3.4%. Despite this, the RBA noted that recent progress in controlling inflation has stalled, maintaining a stance of keeping options open.

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This concludes our weekly recap. Have a great weekend and see you next week! 👋