As markets digested Jerome Powell’s economic remarks, US stocks remained near record highs. In particular, the S&P 500 tested the 5600 level but struggled to stay above it. A more balanced approach from Powell’s remarks reinforced the belief that interest rate cuts will take place this year. Forward swaps are still pricing in 19bps of cuts in September, but the probability of it has increased week-on-week. In his speech, Powell emphasised that policymakers are looking for more evidence of lower inflation to increase confidence in the softening of monetary policy. However, he also stressed the importance of not cutting interest rates too little or too late, which led the market to keep the possibility of two rate cuts this year on the table. All attention will be paid to the CPI reading this Thursday. The dollar strengthened back above 105 today, following recent days of softness.
The base metals complex began the day on the back foot as markets struggled above the robust resistance levels. However, later in the day, a stronger dollar intensified risk-off sentiment, leading to a correction in prices today. While fundamentals are supporting prices from the downside, the upside is defensive. We expect metals to recover moderately in the coming days. The biggest downside pressures were felt by aluminium and lead, which tested robust support levels at $2,480/t and trend support at $2,200/t, respectively. These levels held firm, and aluminium and lead closed at $2,496.50/t and $2,194/t, respectively. Copper was marginally softer at $9,869/t. Tin was the only metal that continued to climb higher, posting the 9th consecutive day of gains to $34,350/t.
Both oil and precious metals softened following Powell’s remarks, with gold and silver falling to $2,358/oz and $30.74/oz, respectively.
All price data is from 09.07.2024 as of 17:30