In the markets, investor sentiment is subject to a sharp change again like the direction of the weather vane and sharp gusts of "wind" that are really sharp and unpredictable at the moment.
In general, it seems that its participants do not want to notice anything and continue to believe that everything will somehow change for the better. All of these resemble the situation in the markets in 2007 before the last and most devastating financial crisis in world history after the Second World War.
The data on industrial production and retail sales in China released on Wednesday plunged global markets into shock. On an annualized basis, industrial production in growth sharply decreased to 4.8% from 6.3%, while retail sales fell on an annualized basis to 7.6% from 9.8%. The latest fresh intermediate values of Germany's GDP for the second quarter, which were presented later, were finally broken down with the markets. They showed a year-on-year trend of zero growth from 0.6% last July. Moreover, the quarterly figures themselves showed a negative dynamic by 0.1% decline this year, returning to negative territory after the failure last November.
This news impressed investors so much that major stock indices in Europe and the US closed in deep red, reflecting a high degree of investor concern over the already clear signals of an impending recession. What is very important is that while the financial authorities and Donald Trump personally declare that they do not see the risk of America slipping into a recession. Ex-Fed Chairman Janet Yellen, who said on Wednesday that there are really negative moments in the economy, has the same opinion. She sees external risks have grown but the economy is still strong. These statements, as well as previously ignored consumer inflation data, which showed their growth, lowered expectations of markets to lower their key interest rate by 0.25% at the next September meeting to 69.6% from 95.5% a day earlier.
We believe that the overall emerging picture around expectations of new Fed rate cuts will only increase uncertainty. We previously pointed out that the mixed US economic statistics will force the Fed to do nothing, taking a wait and see attitude. In this case, the local stock market will continue to show negative dynamics. On the contrary, the dollar will receive support as the world's reserve currency, which is in demand in the context of a full-blown economic crisis.
Forecast of the day:
The EUR/USD pair is trading below the level of 1.1160 and it can recover to this mark. However, if it holds below it, we should expect a price reversal and resumption of the fall to 1.1100-10.
The price of gold is likely to consolidate in the near future in the range of 1478.55-1533.40 in anticipation of the Fed decision on rates in September. But today, the price may continue to decline to the lower boundary of this range if it overcomes the mark of 1508.00.