Dovish Sentiment Prevails Amidst Shifting Economic Landscape

Dovish sentiment is gaining momentum in the financial markets as investors react to a flurry of remarks by Federal Reserve officials. This shift in sentiment has led to a weakening US dollar, while gold and oil prices take a breather.

Key Factors for Today

• Investors embracing dovish remarks, leading to a continued risk-on sentiment.
• Atlanta Fed President Raphael Bostic's dovish stance weighs on the US dollar.
• China's GDP downgrade and Euro's resilience driven by stimulus reports.
• Commodities showing signs of stabilization as Gaza conflict impact diminishes.
• Positive performance in consumer staples supporting US equities.

Market Movers

• Atlanta Fed President Raphael Bostic's dovish stance: No further rate hikes unless data deviates significantly, pressuring the US dollar.
• IMF downgrades China's GDP growth outlook: Emphasizes real estate sector issues, but Euro strengthens on rumours of China's deficit increase.
• Commodity market stability: Eased Gaza concerns halt oil and gold rallies; no evidence of Iran's involvement.
• US equities rise: Lower yields, dovish Fed, and PepsiCo's strong earnings support. Nasdaq reclaims 15,000 with resistance at 15,240.

Economic Calendar

• German Inflation Data
• Speech by Fed's Bowman
• US Producer Price Index (PPI)
• Speech by Fed's Waller
• Speech by Fed's Bostic
• Release of FOMC Meeting Minutes
• API Crude Oil Stock Change

The Big News

Bostic's Dovish Stance Puts Pressure on the Dollar Atlanta Fed President Raphael Bostic, a non-voting member, echoed the dovish sentiment by stating that further rate hikes are unnecessary unless incoming economic data significantly deviates from expectations. Bostic also highlighted rising economic uncertainty resulting from the conflict in Gaza. These comments pushed the US dollar index to its lowest point since September, potentially heading towards $105.15 unless bullish sentiment quickly recovers.

Euro Remains Resilient Despite China's GDP Downgrade The International Monetary Fund (IMF) downgraded China's GDP growth outlook, emphasizing the need for China to address issues in its real estate sector. Despite global economic risks, the IMF foresees a soft landing for China's economy. Rumours circulated that China was considering increasing its 2023 deficit to stimulate growth, which boosted the Euro against a weaker dollar. EUR/USD extended its 5-day winning streak, surpassing $1.06, with potential to reach $1.0646, while maintaining support at $1.0566.

Commodities Find Stability Amidst Gaza Conflict Easing concerns about further escalation in the Gaza conflict have curbed the rally in oil and gold prices. There is no concrete evidence implicating Iran in the conflict. West Texas Intermediate (WTI) oil prices settled between $84.70 and $87.20 per barrel, forming an inside bar pattern. Gold's upward momentum paused at $1860 per ounce, with potential resistance at $1880 and support at $1848 per ounce. Additionally, the US Energy Information Administration (EIA) reported record-high crude exports in H1 2023 at 3.99 million barrels per day, although the US remained a net importer.

Consumer Staples Earnings Boost US Equities US equities posted gains for the third consecutive session, buoyed by falling yields and dovish comments from Fed officials. The impact of the Gaza conflict appeared to lessen. PepsiCo's better-than-expected profits and upgraded forecasts contributed to the positive sentiment. Notably, the company reported minimal impact from weight loss drugs. The Nasdaq regained the 15,000 level after a 3-day winning streak, forming resistance at 15,240 and maintaining round support levels.