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The most important week of the year is here, and investors and traders are very much on the edge of their seats, waiting for the next shoe to drop. We widely expect traders to exercise caution, preferring not to place large bets ahead of this event. The event is the Fed's monetary policy, with a widely anticipated interest rate cut for the first time since COVID. The market players are deeply divided over the extent of the interest rate cut that the Fed will implement during this event, as this cut will significantly influence the future trajectory of the US markets. It's a classic case of 'read the tea leaves' as everyone tries to predict the Fed's next move.
The recent US NFP data confirmed that the US labour market is not week and the US inflation data has also confirmed a positive reading. All of this has set a stage for the Fed to remain highly discretionary in their decision.
Investors are closely monitoring the attempted assassination of Trump in the context of politics and US elections. While the market has kept its cool, there's an undercurrent of 'waiting for the other shoe to drop'. The fact that the event didn't cause massive chaos, as it would have if the former president had sustained injuries, has undoubtedly reassured traders. However, the event has certainly created a sense of unease, as this is the second assassination attempt on Trump, and many have started to question what this all means for the US in terms of political stability. Political stability is now the elephant in the room, and it's making traders nervous.
As for the UK, the fresh housing data from Rightmove has shown that there is some sense of optimism among sellers as the Bank of England’s latest monetary policy has boosted house prices in the UK. The average house price increased by 0.8%. Rightmove's agreed sales number, which jumped more than a quarter compared to 2023, is another encouraging sign of stability in the UK's housing market. But let's not put the cart before the horse—while the numbers are encouraging, the UK economy still feels like it's on shaky ground, with consumers continuing to struggle to make ends meet.
Crude oil prices are caught in a classic 'tug of war' as traders brace for another volatile week. It appears that oil traders may have another tough week to weather. The reason for this is the fresh economic reading out of China, which confirmed that the economic activity is not healthy enough to encourage strong demand for oil prices. Traders are readjusting their strategies and attempting to understand the recent supply decision by OPEC+. Their primary focus is on whether the OPEC-introduced cuts will remain permanent. It’s a game of 'wait and see,' especially with declining demand in China and the US's self-sufficiency in oil putting a lid on any potential price rally.
This week, gold prices are in for a reality check, with traders expecting a dovish hand from the Fed. Last week's economic data gave traders hope that the Fed is more than likely to cut interest rates by 50 basis points, even though there haven't been any clues from the Fed itself as to what their thought process is behind this. The Fed chairman has made it clear that they will not make any hasty decisions, instead opting for a slow and steady approach. So if the Fed cuts the rate by 25 basis points, it might be a case of 'close, but no cigar' for gold bulls. However, if the Fed cuts the rate by 50 basis points, then we could see some more interest among gold traders, and this means that we may see more upside moves for gold prices."
