Crude oil touched the $100 mark and the 10-year Treasury yield broke above 4.6%, while the U.S. military paused its 13-day air campaign against Iran over the weekend. Iran said it would stop retaliating but remains skeptical about the progress of the situation. However, markets once again saw a glimmer of hope for diplomatic solutions. International oil prices opened lower on Monday, dragging down the U.S. dollar, while gold jumped straight to $4,100 at the open, and non-U.S. currencies generally rebounded.

This week's economic calendar is exceptionally busy, featuring not only interest rate decisions from the Federal Reserve, the Bank of England, and the Bank of Japan but also the peak of the U.S. second-quarter earnings season. Key economic data includes inflation reports from the U.S., Japan, and Australia.

Federal Reserve Interest Rate Decision – Thursday (02:00)

This is undoubtedly the absolute focus of the week. The cooler-than-expected U.S. June CPI data briefly boosted hopes for a delayed rate hike, but with oil prices surging in mid-July, inflation risks have come back into focus. The market currently assigns a 33% probability of a rate hike this week, indicating the possibility has not been fully ruled out (an unexpected hike would be bullish for the dollar and bearish for gold). The more likely scenario is that the Fed will hold rates steady while maintaining a hawkish tone. If one or two voting members favor a rate hike, it would be a clear hawkish signal. Looking ahead to the second half of the year, rate markets expect at least one rate hike, with the probability for September currently around 76%.

Bank of England and Bank of Japan Interest Rate Decisions

Markets similarly expect the Bank of England (Thursday 19:00) and the Bank of Japan (Friday) to hold steady this week. The UK's June CPI unexpectedly fell to 2.6%, and the labor market is weakening, making it difficult for this meeting to deliver a hawkish signal. The central bank may wait for the new government's fiscal policy (potential tax cuts could stimulate inflation) to become clearer before making a decision. Rate markets expect at least one rate hike from the BOE this year. The Bank of Japan's rate hike prospects may be more susceptible to the influence of Japan's economic and fiscal policies (which could delay a rate hike). With the effectiveness of intervention diminishing, it will be difficult for the yen to escape its current weakness unless the central bank implements a faster pace of rate hikes. Furthermore, Japanese authorities are unlikely to intervene during the peak of this week's central bank meetings.

U.S. Earnings Season Reaches Its Peak

This week is the busiest of the earnings season, with roughly one-third of S&P 500 companies reporting, including Microsoft, Meta, Apple, and Amazon. Samsung Electronics and SK Hynix also publish their results this week. According to LSEG, second-quarter earnings for the S&P 500 are up 26.5% year-on-year, which is impressive, but excessive AI capital expenditure remains the biggest concern for investors. The sharp drop in Google's stock last week following its earnings suggests that even with optimistic results and outlooks, excessive AI spending and negative cash flow can still be punished by the market. This sets the tone and a reference for the stock price reactions of other tech giants this week. Another test of confidence in AI this week is the potential listing of CXMT on the STAR Market, the world's fourth-largest and China's largest memory chip manufacturer.

Economic Data

Key economic data this week includes the U.S. June PCE price index and Q2 GDP (Thursday 20:30), Australia's June CPI (Wednesday), and the Eurozone's July CPI (Friday). Apart from Australia's inflation data, the impact of U.S. and Japanese inflation data on interest rate outlooks or currency movements is likely to be limited.

XAUUSD Gold 4-Hour Chart

As shown in the chart, gold found support and began a technical rebound near $4,000 last week, but it lacked fundamental confirmation at the time. After giving back some gains, the metal posted only a modest weekly increase. Following the shift in the geopolitical landscape at the start of this week, which led to a dollar pullback, gold now has both technical and fundamental tailwinds, suggesting the rebound could extend in the early part of the week. In the short term, gold is challenging resistance near $4,110 from the trendline and moving averages. Given the rising lows and the bullish engulfing pattern formed around $4,023 and $4,050, the probability of a breakout is not low. If a breakout occurs, $4,155 would be the first target for bulls, followed by the $4,200/20 area (the upper boundary of the bottom consolidation range). However, whether gold can initiate a full trend reversal remains highly uncertain. The potentially hawkish tone from the Fed meeting early Thursday morning could put significant pressure on the bulls. Additionally, the sustainability of the ceasefire between the U.S. and Iran remains to be seen.

Nasdaq 100 Index 4-Hour Chart

The Nasdaq 100 index found tentative support near 28,100 last week after hitting a fresh low since May. Divergence in technical indicators suggests a short-term correction is possible. A break above 28,600 could pave the way for a test of the 29,000 level. However, market sentiment remains pessimistic, and the market will need to wait for the results of this week's big tech earnings to gauge confidence. Until then, the risk of the index rallying and then falling again remains elevated, and it may take repeated testing before a clear support level is established. Notably, the listing of a major Chinese chipmaker is bound to intensify the AI competition landscape between the U.S. and China, which is a potential headwind for U.S. tech giants.