A new week is upon us and market participants are wondering if last week’s record-breaking push in US stocks will continue. Despite reduced trading hours due to markets being closed on Friday, the Nasdaq Composite, S&P 500 and Dow Jones nonetheless managed respective gains of 1.6%, 1.7% and 2.3% on the week, with the former two indices both breaking new ground. Unfortunately, such hopes may be short-lived. The threat of tariffs is re-emerging once again, as president Trump suggested on Sunday that country-specific measures would come into force on the 1st of August. The original deadline for such tariffs was set for the 9th of July, so depending on how one looks at it, the new date could either be viewed as an ultimatum or as an extension to give countries more time to negotiate. If no new deals are hashed out, the plan is to implement the original “liberation day” tariffs set out back in April. US stock futures were marginally down as of this morning.
The other question on the back of everyone’s mind is whether or not the Dollar will continue its descent in the days and weeks to come. The DXY dug its heels in a little last week but is struggling to remain above 97 so far today. Some voices are suggesting that an interest rate cut has been too heavily priced in and that the Dollar is undervalued as a result. For all the talk of a rate adjustment in July/September, the Fed has not changed its tune all year and the combination of a strong labour market coupled with inflation above the 2% target does not bode well for those hoping for a rate cut. FedWatch is now showing a 95% chance of a rate hold during the next meeting on the 30th of July.
Crude oil fell again this morning as analysts expect prices to remain below $70 a barrel for the foreseeable future, primarily due to market oversupply. While the brief exchange between Israel and Iran temporarily spiked prices due to delivery concerns, such matters are already in the past and the fundamentals of the global oil trade are back in the driver’s seat. The dynamic changed for the worse on Saturday after OPEC+ agreed to increase production by 550,000 barrels per day, exceeding expectations. August futures are now $66 for WTI and just under $68 for Brent Crude.
The week ahead has remarkably little to offer in terms of economic data. Tomorrow, the Reserve Bank of Australia is expected to slash the interest rate on the Australian Dollar by another 25 basis points to 3.6%. On Wednesday, markets will welcome the latest FOMC minutes to get a reading on the mood among the Federal Reserve board of governors. Beyond the above, geopolitics and tariffs are likely to be the main drivers behind market movements this week.
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