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US stocks rose to a seven-week high as investors pushed upon Fed rate rises


US stock rallied on Thursday, preserving its bullish momentum and climbing to a seven-week high as investors pared their bets on Fed’s aggressively rate hikes amid the weak economic data. The US Gross Domestic Product (GDP) in Q2 showed that the economy entered a technical recession after contracting by 0.9%. However, investors remained their speculation that the Federal Reserve could reduce the pace of monetary tightening despite the data showing that the economy is losing momentum.

Fed chairman Jerome Powell also said on Wednesday that rate hikes would slow at one point and he shed quite some light on the future of monetary policy. Inflation measures will likely fall amid the slowing economy, which might bring the end of the tightening cycle nearer. In the Eurozone, Germany’s inflation data flashed mixed signals as the Consumer Price Index (CPI) dropped to 7.5% YoY but the Harmonised Index of Consumer Prices (HICP) climbed to 8.5% yearly.

The benchmarks, S&P 500 and Dow Jones Industrial Average both advanced on Thursday as the dismal economic data eased the expectation for aggressively rate hikes by the Fed. The S&P 500 was up 1.2% on a daily basis and the Dow Jones Industrial Average also advanced with a 1.0% gain for the day. Ten out of eleven sectors stayed in positive territory as the Real Estate and the Utilities sectors are the best performing among all groups, rising 3.70% and 3.53%, respectively. The Nasdaq 100 meanwhile climbed the least with a 0.9% gain on Thursday and the MSCI World index rose 1.3% for the day.

Main Pairs Movement

The US dollar declined on Thursday, remaining under selling pressure and retreated toward the 106.1 level as the safe-haven assets performed better against the greenback yesterday. The DXY witnessed some buying and touched a daily top near the 107 mark during the European session, but then failed to preserve its upside traction meanwhile surrendered most of its daily gains. The market’s expectations of no more aggressive rate hikes from the Fed and the release of weaker US Q2 Gross Domestic Product data both exerted bearish pressure on the US dollar.

GBP/USD edged higher with a 0.18% gain on Thursday amid a weaker US dollar across the board. However, the political jitters in the UK and Brexit woes might limit the upside for the cable. The GBP/USD pair dropped to a daily low below 1.211 level in the late European session, then regained upside traction to recover most of its daily losses. Meanwhile, EUR/USD failed to overcome recent losses and remained under bearish pressure after dropping to a daily low below 1.012 level in the European session. The pair was up almost 0.05% for the day.

Gold surged with a 1.25% gain for the day after refreshing its daily high above the $1756 mark in the late US trading session, as the slowing economy and the renewed weakness in the greenback both lend strong support to the precious metal. Meanwhile, WTI oil failed to preserve its upside traction and retreated to the $97 area on Thursday.

Economic Data

CurrencyDataTime (GMT + 8)Forecast
EURGerman Unemployment Change (Jul)15:5515K
EURGerman GDP (QoQ) (Q2)16:000.1%
EURCPI (YoY) (Jul)17:008.6%
USDCore PCE Price Index (MoM) (Jun)20:300.5%
CADGDP (MoM) (May)20:30-0.2%