Stock markets are trading slightly in the red on Tuesday but we're not seeing any moves of real substance, as traders continue to focus on events later in the week.
It's never ideal when the headline act is so late in the week as we can often spend the rest of it sitting idly by trying to feign interest in the supporting cast. Barring another flare up in the Gulf of Oman or another unexpected event, that is always how this week was likely to pan out and so far, that's exactly what we're seeing.
It doesn't help that this G20 meeting has the potential to be a game changer. Clearly investors expectations are either quite low or they just don't think it makes any difference to what interest rates will do on the back of it. As it stands, a US interest rate cut is 100% priced in for July, with markets pricing a 38% chance that it's 50 basis points. Moreover, three rate cuts is more than 70% priced in by year-end.
Should Trump and Xi surprise us all and find a compromise that both accelerates negotiations and averts the need for further tariffs in Osaka, I would be very surprised if these odds don't change significantly. They seem far too pessimistic based on inflation and a slight weakening in the data, alone. I can't imagine the consumer confidence or manufacturing data will change anything, although Powell and Bullard's speeches later on may be interesting, especially if they signal that markets have gone too far.
Commodity markets keeping us entertained
We may be in pause mode when it comes to stock markets, after they hit new records last week but thankfully, commodity markets are providing plenty of interest. The oil rally has stalled a little, with WTI running into some resistance around $58 but we're hardly seeing the sellers coming in and taking charge.
That said, if momentum starts to lag then that could make $59-60 an even tougher resistance for it to overcome without potentially seeing some profit taking or a correction first. Naturally, that may change very quickly in the event of another escalation in the Gulf which, given the events of recent weeks, seems a high risk.
No stopping Gold it seems
Gold is flying once again as it looks to extend its winning streak to six days and build on the almost 7% gains it's made in that time. All you have to do is look at a US dollar chart to see what the trigger for the surge has been. Previously when we've traded around these levels - and for that we're talking earlier this decade - $1,440 has been a notable area of support and resistance which may explain why we've seen some profit taking around here today.
What's interesting is that we the rally doesn't seem to be dropping any momentum so there may be some more room to run. Above here, $1,470-1,480 was also interesting previously so perhaps we're entering into a crowded area where momentum may start to slip.
Bitcoin making a comeback
Bitcoin is on the rise again on Tuesday, breaking back above $11,000 is hitting new highs for the year as it continues it's remarkable comeback. Bitcoin is now up around 50% from its lows earlier this month and if history is anything to go by, there's no reason why it can't continue to march higher from here.
Facebook certainly looks to have done cryptocurrencies a massive favour which may make you question whether the rally is built on any kind of solid foundations. That said, I'm sure many in the community would argue that a lot of positive progress has been made over the last 18 months which has been overlooked and is now paying dividends as the Libra announcement draws attention back to the space. Where it goes from here is anyone's guess and I'm sure we're going to start seeing some extremely bold predictions in both directions over the coming weeks.
This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities.