Dollar Weakens after the Release of July Annual Inflation Rate

Lebanese Forex Market

The Euro appreciated against the LBP with the currency pair going from last week €/LBP 97,698.2 to €/LBP 98,306.8 by August 16^th, 2024. The Nominal Effective Exchange Rate (NEER) of the Lebanese pound slightly rose by 0.16% standing at 229.43 points on August 16^th, 2024.

International Forex Market

The dollar index reached 7-month low of 102.2 on Wednesday after the July 2024 US annual inflation rate has been released in which it has beaten the expectations and recorded 2.9%. Then, it recovered to reach 102.86 reinforced by favorable US economic data that were better than the forecasts, indicating that fear of recession has evaporated. US retail sales rose by 1% compared to prior month and exceeding the 0.3% forecasted increase. Moreover, latest labor market data showed a decrease in initial jobless claims by 7,000 to reach 227,000 by August 10^th, 2024 compared to the forecasts of 235,000 and continuing jobless claims decreased to 1.86 million by August 3^rd, 2024.

The Euro appreciated against the dollar by 0.62% over the course of the week and reached EUR/USD 1.0984 by August 16^th, 2024 after hitting 7-month high above $1.1 on Wednesday. Traders are concerned that the Federal Reserve might be more aggressive in rate cut than European Central Bank (ECB) with 25% probability that Federal Reserve will make a 50 bps cut in its September meeting. Moreover, traders are expecting two more rate cuts by mid-October.

The British Pound increased by 0.89% over the course of the week reaching $1.2873 as investors are assessing recent economic data and its effects on the monetary policy as retail sales rebounded by 0.5% in July after a decline by 0.9% in June. Moreover, inflation increased and recorded 2.2% but still below the 2.5% forecasted rate. Therefore, traders are expecting two 25 bps rate cuts by Bank of England (BoE) in 2024.

The Japanese Yen depreciated past 148 against the US Dollar that strengthened after the favorable US economic data. Moreover, political uncertainty in Japan affected the Yen as the prime minister might not to be re-elected as party leader in September. Furthermore, Japan’s economic data were favorable, as the Japanese economy grew by 3.1% in the second quarter after a contraction by 2.3% in the first quarter. Finally, a former Bank of Japan (BoJ) official anticipates the BoJ might not be able to raise rates this year due to financial market turmoil.

Commodities

Gold, considered as a safe-haven asset, increased this week by 1.27% over the course of the week to reach $ 2462.22 / ounce on Friday August 16^th, 2024 as tension in the Middle East is escalating awaiting the Iranian retaliatory strike against Israel.

Crude oil set its second weekly gain to reach $80.74 / barrel for Brent crude oil and $77.64 / ounce for WTI after the release of favorable US economic data. Moreover, the continued escalating conflicts in the Middle East may raise potential oil supply risks, awaiting the outcome of Gaza ceasefire negotiations. On the demand side, concerns about China’s demand continue after recent economic data.

Steel Rebar futures fell to near its 8-year low and reached CNY 2,919 / ton in August after China’s economic slowdown driven by large-scale housing oversupply while the demand for new homes declined at a faster pace, accompanied with largest annual decline in home prices since 2015.

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