Markets today: A chilled end to the week, investors focus on the Fed, oil volatility continues

It's been a relatively chilled end to the week with the economic calendar a little thin and investors likely having one eye already on next week's US inflation data and Fed decision.

Traders in the UK may also mentally already be in weekend mode with summer appearing to have finally made an appearance. It's not likely to be a weekend to be spent indoors and by the look of the markets today, the weekend may have already started for some.

As far as markets are concerned, the focus now is on US inflation data on Tuesday and the Fed on Wednesday. Without being too dramatic, these could really set the tone for the rest of the summer. Eurozone HICP data recently gave us a rare inflation treat and a repeat from the US could give investors a huge boost.

A volatile week but oil remains in lower range

It’s been a volatile week for oil prices, starting with the spike on the back of Saudi Arabia’s one million barrel production cut and ending with the US and Iran denying a temporary nuclear deal that saw prices plunge on Thursday. These are very jittery markets against the backdrop of a deteriorating economic outlook. 

The Saudi cut has had little impact on the eventual price and Reuters reports that some members were not aware of the move until the press conference will not do anything to dispel suspicions of disunity within the group. The Saudis are clearly not on the same page as their allies and are seemingly far more price obsessed. They won some concessions from 2024 but that’s a long time away and much can and probably will change in that time.

Gold choppy ahead of the Fed

​Gold has been in consolidation over the last couple of weeks with traders seemingly having an eye on the inflation data on Tuesday, a day before the Fed announces its latest interest rate decision. The end of the tightening is either here or near and the CPI numbers on Tuesday may determine whether the central bank opts to pause this month or push through one more 25 basis point hike. A pause probably makes more sense at this point but after being too slow to start tightening early in the cycle, the Fed may be more inclined to do one more than is needed than risk underreacting once more.

A dovish pause could be very bullish for gold next week, although a hawkish pause may be the best we can hope for barring a very promising inflation report. A dovish hike could be a slight negative, while a hawkish hike may only come if we see another strong inflation number. As I said, a lot may hang on Tuesday.

Bitcoin steadies but crypto outlook highly uncertain

It’s been a wild week for crypto but bitcoin prices have held up quite well, with traders seemingly preferring the safety of established coins that don’t appear to have a target on their back. Things may change depending on how heated the situation gets with the SEC and crypto exchanges but so far, the community appears to be keeping a cool head. I guess this point was always going to come at some stage, it was just a matter of when rather than if.