As we begin the week, the financial markets are treading cautiously in response to reports of an assassination attempt on former President Donald Trump. This unsettling news has put investors on edge, leading to a subdued start to trading activities. Moreover, the economic calendar for the day does not feature any high-impact data releases, further contributing to the cautious sentiment in the markets.
Taking a closer look at the US Dollar’s performance over the past week, it is evident that the currency has been relatively weak, especially against the Japanese Yen. The US Dollar Index is currently in a consolidation phase above 104.00, following a sharp decline in the previous week. Furthermore, the benchmark 10-year US Treasury bond yield is fluctuating above 4.2%, and US stock index futures are trading slightly higher.
During the Asian trading hours, data from China revealed that the Gross Domestic Product (GDP) expanded at an annual pace of 4.7% in the second quarter. This reading was lower than the market’s expectation of 5.1% and fell short of the 5.3% growth recorded in the first quarter. Additionally, Retail Sales in China grew by 2% annually in June, missing analysts’ estimates, while Industrial Production expanded by 5.3%, down from 5.6% in May.
In the forex market, the EUR/USD pair experienced a gain of more than 0.6% last week and is currently trading around 1.0900. On the other hand, the GBP/USD pair rose by over 1% for the second consecutive time last week, reaching a yearly high and edging closer to the 1.3000 mark. Meanwhile, Gold struggled to maintain its bullish momentum after a surge on Thursday and registered minor losses on Friday, with XAU/USD hovering above $2,400 at the beginning of the week.
In the world of finance, the concepts of “risk-on” and “risk-off” markets play a crucial role in shaping investor sentiment. During “risk-on” periods, investors are optimistic about the future and are more inclined to invest in risky assets. This optimism often leads to an uptick in stock markets, higher commodity prices (excluding Gold), and a strengthening of currencies of commodity-exporting nations. Conversely, “risk-off” markets see investors adopting a more conservative approach, opting for less risky assets such as government bonds, Gold, and safe-haven currencies like the Japanese Yen, Swiss Franc, and US Dollar.
As we navigate through the financial markets on July 15, it is essential to remain vigilant and adapt to the prevailing market conditions. The impact of geopolitical events, economic data releases, and investor sentiment can shape the direction of various asset classes. By staying informed and understanding the dynamics of risk-on and risk-off markets, investors can make well-informed decisions to navigate through uncertain times.