The Federal Reserve will publish the first minutes under the chairmanship of Kevin Warsh on Wednesday. The market discounts a 78% probability that rates will remain unchanged at the July meeting, although expectations for a cut in September are growing.
The Federal Reserve will release the minutes of its June meeting on Wednesday, the first under the new chairmanship of Kevin Warsh, who has criticized the excessive use of forward guidance. The market currently discounts a probability close to 78% that interest rates will remain unchanged at the meeting on July 29, although expectations for a possible move in September are increasing, according to federal funds futures.
The weaker-than-expected employment report for May has fueled speculation that the Fed could ease its stance sooner than anticipated. However, core inflation remains above the 2% target, keeping investors cautious.
Wall Street closed last week with solid gains: the Dow Jones approached all-time highs (+2% for the week), the S&P 500 rose by 1.8%, and the Nasdaq gained 2.1%, despite weakness in the semiconductor sector (ETF SMH: -3.2%). Futures are trading slightly lower today: S&P 500 (-0.15%), Nasdaq (-0.48%), while European futures (DAX and FTSE) remain virtually flat and the EuroStoxx 50 is down about 0.2%.
OPEC+ increases production and oil falls to four-month lows
OPEC+ confirmed its fifth consecutive monthly increase in production limits, with an increase of 188,000 barrels per day starting in August, raising the cumulative increase since April to nearly 800,000 barrels per day. Brent has fallen to the range of $71.78-$71.90 per barrel (its lowest level in four months), while WTI is between $68.47 and $68.72.
Gold is correcting after last week's rise of over 2% and is trading between $4,151 and $4,172 per ounce, pressured by a slightly stronger dollar, although J.P. Morgan maintains a target of $4,300 for the third quarter. Silver is down about 1%, to $61.7-$61.8, while natural gas records the largest decline among commodities, with a drop of nearly 2%.
The yen under pressure: risk of intervention at 40-year highs
The yen remains the main focus in the foreign exchange market. The USD/JPY cross is trading between 161.5 and 161.9, just below the 40-year high (since 1986) of 162.84. The risk of intervention by the Japanese Ministry of Finance continues to be the main factor limiting further depreciation of the yen, although several analysts — including Goldman Sachs, which has raised its forecast to 165 — believe that intervention alone will not permanently reverse the trend without a change in macroeconomic fundamentals.
The euro remains near $1.1430-$1.1435, the British pound is trading between $1.3351 and $1.3381, and the South Korean won started its first spot trading day at a range of 1,532-1,534 per dollar.
For investors, the key to the session will be the release of the US ISM services index (4:00 PM), the speeches by Christopher Waller and Christine Lagarde at the ECB conference, and the evolution of the yen, as a possible test of the 162.80 level could trigger intervention by Japanese authorities. On Wednesday, market attention will shift to the Fed minutes.
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