U.S. Building Permits, UoM Consumer Sentiment and Inflation Expectations

On Thursday, the EUR/USD pair gave back some of its recent gains, pressured by a broad strengthening of US Dollar demand following sharper-than-expected economic data from the US.

Retail sales for July surpassed expectations, suggesting robust consumer spending and easing recession fears. Additionally, a decline in jobless claims pointed to a resilient labor market. However, a counterbalance to this optimism emerged in the manufacturing sector. Industrial production contracted sharply in July, mirroring a broader global manufacturing slowdown.

Key economic data on tap for Friday includes US building permits, consumer sentiment and inflation expectations from the University of Michigan, and a speech by Fed official Goolsbee.

Gold prices posted moderate gains on Thursday, nearing its record high of $2,484 per ounce supported by market uncertainty, rising geopolitical tensions in the middle east and rising expectations for a Fed rate cut in September.

Rising geopolitical tensions in the Middle East, and the risk of conflict between Iran and Israel following the assassination of a Hamas leader in Tehran, continued to underpin safe-haven demand for gold. Some market experts advocated for a long gold position as a hedge against a potential escalation of hostilities in the region.

The focus for gold traders turns to Thursday’s US consumer sentiment and building permits reports.

Oil futures recovered on Thursday, following two consecutive daily losses, with the two benchmarks WTI and Brent, rising by 0.83% and 1.17% respectively.

A combination of a strengthening US economy and declining interest rates fueled optimism about increased oil demand. In addition, ongoing geopolitical tensions in the Middle East, and the threat of an Iranian retaliation against Israel for recent attacks by Hezbollah and Hamas kept a floor under crude prices.

Some pressure on prices derives from persistent worries about a Chinese economic slowdown and the fact that the travel-heavy summer season came to a close.

Wall Street enjoyed a positive week as economic data painted a brighter outlook, with the US 500 up by 1.82% on Thursday and 3.85% so far this week. Softer-than-anticipated inflation figures fueled expectations of an impending interest rate cut, while strong retail sales and employment numbers eased recession concerns. Although a modest uptick in monthly inflation tempered enthusiasm for a more aggressive rate cut, market sentiment leans towards a quarter-point reduction in September.

In corporate news, Retail giant Walmart surged nearly 7% on Thursday after exceeding analyst expectations in its second-quarter earnings report. This strong performance, driven by robust e-commerce growth and improved margins, reinforces Walmart's position as a bellwether for the retail industry. While Home Depot reported weaker-than-expected sales earlier this week, Cisco Systems surged over 5% on strong quarterly results and a restructuring plan. Though Cisco's growth is expected to moderate, analysts at UBS remain optimistic about its long-term trajectory.

Investors are now focused on upcoming reports on US building permits, the University of Michigan survey on consumer sentiment, inflation expectations and a speech by FOMC Member Goolsbee.