Despite no breakthrough from the meeting between U.S. President Donald Trump and Russian President Vladimir Putin, market sentiment remains slightly positive, mainly due to the lack of negative news. Trump’s comment that “we have a very good chance of getting there” adds to the optimism. However, French President Emmanuel Macron’s push for a strong stance ahead of Ukrainian President Volodymyr Zelensky’s Washington visit, and demands from both Russia and Ukraine, also test the risk-on mood.
Caution remains ahead of this week’s annual gathering of global central bankers at Jackson Hole, along with the Federal Open Market Committee (FOMC) Minutes and preliminary August Purchasing Managers’ Index (PMI) readings from major economies, all of which could influence sentiment. Meanwhile, the U.S. continues to criticize India for funding Russia’s war by buying oil, potentially jeopardizing their strategic trade partnership.
Elsewhere, United Kingdom (UK) housing data was mixed, while New Zealand’s business service index improved. The New Zealand Institute of Economic Research (NZIER) shadow board recommends a 0.25% rate cut at this week's Reserve Bank of New Zealand (RBNZ) meeting.
Oil prices remain under pressure, despite concerns about supply disruptions from Hurricane Erin on the U.S. East Coast. Hopes of a Russia-Ukraine peace deal may lead to increased oil supplies from Russia. Additionally, fears of weaker energy demand, even if the Organization of the Petroleum Exporting Countries (OPEC) doesn’t think so, are weighing on prices, with OPEC continuing to reverse previous supply cuts.
The U.S. Dollar Index (DXY) is recovering after a two-week downtrend, with markets preparing for dovish signals from the FOMC Minutes and Jackson Hole. U.S. Retail Sales matched market forecasts, and prior data were revised higher. This, along with strong U.S. Producer Price Index (PPI) and mixed U.S. Consumer Price Index (CPI) data, challenges the previous expectations for a larger Federal Reserve (Fed) rate cut. However, interest rate futures still show an 84% chance of a 0.25% rate cut in September, down from over 90% last week, with the probability of two additional rate cuts in 2025.
Gold recovers after a downbeat week, while EURUSD and GBPUSD edge higher after two consecutive weeks of gains. USDJPY shows mild gains but lacks upward momentum. AUDUSD and NZDUSD pare weekly losses, with NZDUSD preparing for a 0.25% rate cut by the RBNZ. USDCAD breaks a two-day winning streak, paring weekly losses, despite weaker crude oil prices.
Cryptocurrencies like Bitcoin (BTCUSD) and Ethereum (ETHUSD) fall by more than 1%, as traders pare recent gains ahead of this week’s key events, with signs of trader exhaustion following the previous week's run-up to multi-year highs. Wall Street closed mixed, and U.S. equity futures remain mildly positive, with attention on this week’s earnings reports from top-tier retailers.
Despite the U.S. Dollar’s recent consolidation, EURUSD and GBPUSD continue to rise after two weeks of gains, as market sentiment remains cautiously optimistic about the Russia-Ukraine peace deal. These currency pairs are also supported by dovish expectations from the Federal Reserve (Fed).
In contrast, USDJPY moves higher after a weak week, with traders expecting no further rate hikes from the Bank of Japan (BoJ) in its September meeting. Additionally, U.S.-Japan trade tensions, political instability in Tokyo, and mixed economic data from Japan are further weighing on the Japanese Yen (JPY), supporting the USDJPY rise.
Market caution, along with anticipation for this week’s central bank events, helps the Australian, New Zealand, and Canadian Dollars recover from earlier losses. Despite softer crude oil prices and dovish expectations from the Reserve Bank of New Zealand (RBNZ) and the Bank of Canada (BoC), the Australian Dollar (AUD) is supported by a pause in rate cut expectations from the Reserve Bank of Australia (RBA). As a result, AUDUSD and NZDUSD show a two-day recovery, though momentum is weak, while USDCAD posts its first daily loss in three days.
WTI crude oil opened the week with a gap down to its lowest level since June 2, following a two-week downtrend. The decline reflects concerns that Russian oil may return to the market after months of sanctions linked to the Russia-Ukraine war, as the U.S. works toward ending the conflict. Additionally, fears of weaker energy demand, driven by U.S.-related trade tensions and OPEC+ reversing supply cuts, weigh on prices, despite OPEC’s expectation of stable oil demand through 2025.
Spot gold (XAUUSD) rises by over half a percent, marking its biggest daily gain in over a week. The precious metal benefits from its safe-haven status as investors seek safety ahead of this week’s major events. A softer U.S. Dollar and expectations of lower interest rates from major central banks, especially the Federal Reserve, also support gold.
Meanwhile, Bitcoin and Ethereum both drop by more than 1% after reaching multi-year highs last week. The pullback is likely due to market positioning ahead of the Jackson Hole event, with on-chain data and ETF signals suggesting the cryptocurrencies are overheated.
With no major events on Monday’s calendar, the Trump-Zelenskyy meeting and caution ahead of key data, events, and U.S. earnings reports could lead to a slower start to the week. Negative news on the Russia-Ukraine peace deal, which seems likely, could boost the U.S. Dollar and help crude oil recover some losses. Gold may remain supported by haven demand, while major currencies and Antipodeans could drift lower. Cryptocurrencies appear to have started their anticipated pullback, which may continue. Equities could have a quiet start unless there's a negative surprise from the peace deal, ahead of top-tier retail earnings. Overall, Monday looks set for a dull trading day.
May the trading luck be with you!
