Harris joins the race towards the Whitehouse and is slowly bridging the gap on Trump. Although Trump has had the advantage, it feels as if the tide is turning, and expectations of Republican victory need to be firmly discounted. The Federal Reserve's preferred inflation gauge, the Price Consumption Expenditure (PCE) Index, came in line. However, a deeper dive suggests a slight uptick. Durable Goods orders on an MoM basis have been smashed. New orders for manufactured durable goods in the US slumped 6.6% month-over-month in June 2024, after four consecutive monthly increases and missing market expectations of a 0.3% increase. This is a worrying sign for the economy and one that may see the FED into the easing cycle sooner rather than later. This Friday’s employment data may be the last set of economic data that will tip the FED into relaxing monetary policy. A non-farm payroll of less than 150k should see the FED implemented. If dovish Fed rhetoric does not emerge by the 31 July FOMC meeting, then we need to wait until the Jackson Hole Fed symposium in late August for a chance for the Fed to signal a September rate cut. In Australia, this week, we have important inflation data that may help the RBA decide monetary policy and/or provide some rhetoric on which we can hang our hats. 

But first, its probably a good idea to focus on the PCE Data. The Federal Reserve’s preferred inflation gauge recently came in line with expectations. However, a deeper analysis reveals a slight uptick, indicating persistent inflationary pressures. It remains a key measure of inflation, reflecting changes in the prices of food and energy, which are consumed by households. This nuanced view of the PCE data is critical for understanding the FED's future policy actions. The recent MoM data showed an increase +0.2% against an expected 0.1%. However, taken into perspective, it is higher than Mays read, albeit below the previous 4 reads, indicating that price pressures are being contained. Although The core PCE inflation gauge for the US economy was unchanged at 2.6% in June 2024, the same as in May it was above forecasts of 2.5%. It remains above the Federal Reserve's target of 2%. It’s interesting to note that since the FEB 22 peak of 5.575% it has been softening. Against this backdrop of steady price pressures, US Durables goods orders were smashed.

New orders for manufactured durable goods in the US slumped 6.6% month-over-month in June 2024, after four consecutive monthly increases and missing market expectations of a 0.3% increase. Transportation equipment drove the decrease, down by 20.5%, namely orders of motor vehicles and parts (-0.1%), nondefense aircraft and parts (-127.2%) and defence aircraft and parts (-10%). Orders also fell for capital goods (-18.4%), primary metals (-0.1%), and computers and related products (-1.1%). The numbers for the first time since February cam in on the negative side of the ledger.

The recent economic data, including the disappointing durable goods orders, may influence the FED's decision-making process regarding interest rates. The significant decline in durable goods orders and softening inflationary pressures might prompt the FED to consider entering an easing cycle sooner than anticipated. Upcoming employment data could further support this shift. This Friday’s employment data will be crucial. A non-farm payroll report showing less than 150,000 new jobs could be the tipping point for the FED to relax its monetary policy. Weak employment figures would signal that the economy is slowing down, potentially warranting a more accommodative stance from 

FED Rhetoric and Policy Signals:

If dovish rhetoric does not emerge by the 31 July FOMC meeting, the next significant opportunity for the FED to signal a policy shift would be at the Jackson Hole Fed symposium in late August. We are now looking for any indications from the FED as to a possible rate cut in September.

What can we expect this week? In the United States, key highlights will include the Fed's interest rate decision and the nonfarm payrolls report as mentioned above. Other important events will feature JOLTs job openings, CB Consumer Confidence, ISM Manufacturing PMI, factory orders, S&P Case-Shiller House Price Index, pending home sales, and the employment cost index. Earnings season will enter one of the busiest weeks, with megacaps Microsoft, Meta, Apple, and Amazon taking centre stage.

Locally, investors will look towards the Inflation Rate due out on Wednesday. The QoQ forecast is for a 1% gain, whilst the last print was also +1%. The YoY is forecast to reverse recent gains and tick higher. The rate has softened since the high of 7.8% in Q4 22; the current rate is 3.6%, which is well above the RBA’s targeted rates. Following hawkish comments from the Reserve Bank of Australia and a rise in monthly consumer price index readings over the last two months, markets are pricing in a higher probability that the central bank will lift interest rates at its meeting next week. We do feel that this is not the case and expect the RBA to tolerate a slight increase in the inflation rate more especially one caused by higher energy prices. A larger-than-expected increase will see the RBA act, but given expectations, expect this not to be the case.  

On the position front, it has been a few volatile trading seasons, and we have exited and then entered a few trading positions. We are still … the S+P we reentered a … position in the S+P (new entry price …) and decided not to roll off the position. Our stop is in at … on this position. We are … at … with a stop above …  We are still … USD/JPY at …, having added at … This position is in profit.  The … AUD/USD (US…) is doing ok and we sold the AUS/CHF (…) for a good profit. The old … position in wheat rolled off with a small gain. Albeit we reentered a … position Dec which is a little under water.  We are back in Silver at …

Trade Focus:

Wheat

Fundamentals:

Although it may be a little hard to trade Wheat, it is a market that is showing signs of putting a significant low in place. But like most markets trying to find a low, traders need to be patient before entering positions or only test the market before establishing core longs. Wheat prices fell to $… per bushel last Friday following the USDA's report …

Technical Analysis:

Prices have been bouncing around the lows for the last week, and momentum indicators are starting to show signs of divergence. Expect these to turn once we get a few days of … covering. 

Support              …

Resistance         …

Momentum        …