Gold hit a six-week high above $2,400 / ounce

Lebanese Forex Market

Lebanese monetary authorities announced the decision of unifying the LBP exchange rate against USD at 89,500 starting Feb 16^th, 2024. This rate represents the BDL’s electronic platform rate used for calculating commercial banks’ and BDL’s balance sheets, though no decision have been reached on the “banking exchange rate” yet.

The Lebanese exchange rate has maintained a relatively stable exchange rate of approximately 89,700 USD/LBP in the parallel market by July 12, 2024. It is crucial to recognize that this stability is not backed by robust fundamentals, but by the cautious and tight monetary policies by BDL, and as BDL deactivated circular 161 related to Sayrafa since August 2023 when the acting governor Mr. Wassim Mansouri took the reign of BDL.

As for the Euro/LBP currency pair, the Euro depreciated against the LBP with the currency pair going from last week €/LBP 97,259.65 to €/LBP 97,232.8 by July 12^th, 2024. The Nominal Effective Exchange Rate (NEER) of the Lebanese pound slightly rose by 0.32% standing at 228.32 points on July 12^th, 2024.

International Forex Market

The USD Index (DXY) slightly declined by 0.35% to reach 104.51 on July 12^th, 2024.  New data showed disinflation across a variety of categories as US inflation reached a low level of 3%, down from 3.3% from the previous month, thus indicating that the central bank is on a path to its 2% goal. As such, investors are betting that the Fed will cut rates at their September meeting. A few analysts are even thinking the Fed could cut U.S. interest rates at its next FOMC meeting on July 30-31. Nonetheless, Fed Chair Jerome Powell told members of Congress earlier this week that he believes inflation is receding, but isn’t yet confident that it’s sustainably slowing to the central bank’s 2% target. He did, however, indicate that officials are growing more cognizant of the potential impact of high borrowing costs on the job market. Indeed, the unemployment rate, while still low at 4.1%, has risen in each of the last three months. Economists believe that the job market is still quite solid, though the fact the unemployment rate has moved up from 3.4% is concerning.

The Euro appreciated against the dollar by 0.28% over the course of the week and reached EUR/USD 1.087 by July 12th, 2024. As a result, the euro reached a five-week high, primarily driven by a weakening dollar. In Europe, German inflation eased to 2.5% in June, confirming earlier data and suggesting the possibility of another rate cut by the European Central Bank in September. Meanwhile, concerns over political risks in France eased post the parliamentary elections, as fears of high spending party dominance gave way to legislative gridlock.

Similarly, the British Pound slightly appreciated against the dollar by 0.78% over the course of the week and reached GBP/USD 1.2915 by July 12th, 2024, driven by two main factors. First, the US dollar weakened sharply and second, stronger-than-expected GDP data in the UK reduced the chances of an August rate cut, further supporting the pound. The UK economy grew by 0.4% in May, above market expectations of a 0.2% increase.

For other currencies in Europe, the Swiss Franc slightly depreciated by 0.02% by the end of this week to stand at USD/CHF 0.8959 on Friday July 12^th, 2024. Elsewhere, the Japanese Yen appreciated by 0.95% to reach USD/JPY 159.23 as US dollar declined over the course of the week. As for the Chinese Yuan, it slightly appreciated by 0.05% to reach USD/CNY 7.2645 by July 12^th, 2024.

Furthermore, the Australian and Canadian dollar appreciated respectively over the course of the week by 0.22% and 0.10% to stand at AUD/USD 0.6764 and USD/CAD 1.3626 on Friday July 12^th, 2024.

Commodities

Gold prices rose by 0.52% over the course of the week to reach $2,404.61 / ounce on Friday July 12^th, 2024. Gold hit a six-week high above $2,400.00, in the wake of another tame U.S. inflation report that suggests the Federal Reserve will cut interest rates sooner rather than later. Indeed, the highly anticipated June U.S. consumer price index saw a rise of 3%, year over year and analysts are betting the Federal Reserve will start cutting interest rates soon.

Crude oil prices slightly increased over the course of the week by 0.19% and reached $83.32/ barrel although the oil demand outlook is tenuous. In its monthly oil market report, the International Energy Agency (IEA) saw global demand growth slowing to under a million barrels a day this year, mainly reflecting a contraction in China’s consumption. Still, producer group OPEC in its monthly report kept forecasts for world demand growth unchanged, at 2.25 million for this year and 1.85 million barrels per day next year.

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