Daily Summary: The dollar in retreat, even as tensions in the Middle East escalate 🚨

The main factor driving market volatility: Current market volatility is being driven by the clash between optimism surrounding artificial intelligence and growing concerns about an escalation of the conflict in the Middle East. On the one hand, the excellent results posted by technology companies are fuelling investors’ imagination. On the other hand, however, instability in key resource-producing regions serves as a reminder of the ever-present risk. As a result, the markets appear to be treating this uncertainty as the new normal, as evidenced by elevated volatility indicators.

Geopolitics: The situation in the Middle East is becoming increasingly tense as the sixty-day ceasefire between the United States and Iran draws to a close. Negotiations have reached an impasse, and shipping traffic through the crucial Strait of Hormuz has almost completely ground to a halt. Donald Trump has added fuel to the fire by threatening to bomb Oman if it stands in the way of American interests. Iranian officials, for their part, have announced that they will go on the offensive should the diplomatic talks fail.

Macroeconomic outlook: Disappointing retail sales figures in the United States and moderate inflation readings are pushing back the prospect of a swift interest rate rise by the Federal Reserve. The market currently expects that the first decision to tighten monetary policy may not be taken until December. Meanwhile, in Canada, annual consumer inflation unexpectedly accelerated to 3 per cent in July, exceeding market forecasts. This surge was driven mainly by rising fuel prices and higher costs for tourism services.

Indices: US stock markets recorded declines, with the main S&P 500 index falling by 0.2 per cent. The technology-heavy Nasdaq slipped by 0.1 per cent, whilst the industrial Dow Jones lost 200 points. In Europe, the trading session was calmer and characterised by minor fluctuations. It is worth noting that the Polish WIG20 index fell by nearly 0.9 per cent.

Shares: Intuitive Machines’ shares rose by a further 9 per cent after receiving the go-ahead for a lucrative satellite infrastructure programme. US refineries are also posting significant gains, breaking historical records thanks to rising margins. At the other end of the spectrum was EyePoint Pharmaceuticals, whose share price plummeted by 70 per cent following failed clinical trials. The semiconductor sector gained ground following reports that Donald Trump’s administration opposes Apple’s purchase of Chinese chips.

Currencies: The US dollar continues to lose value in the face of weaker macroeconomic data and receding expectations of interest rate rises. As a result, the EUR/USD exchange rate has broken through an important technical barrier (the 200-day EMA) and briefly breached the 1.16 level. Meanwhile, the Japanese yen is under pressure from the interest rate differential, with investors awaiting decisive action from the country’s central bank. The Canadian dollar, on the other hand, gained ground following the release of better-than-expected domestic inflation figures.

Commodities: Capacity issues in the Strait of Hormuz have pushed oil prices higher. US WTI crude rose by 1 per cent to exceed $83 per barrel. Brent crude also gained 1 per cent, surpassing the $89 mark. The weakness of the dollar is also benefiting precious metals, with gold and silver recording solid gains.

Cryptocurrencies: The virtual assets market is in the green today, following positive sentiment in selected technology sectors. Bitcoin has risen by 1.15 per cent, reaching $63,680. Ethereum is also performing well, recording a 1.7 per cent increase. The gains in this market have allowed Ethereum to reach a price of $1,908 per coin.

Volatility observed just before 8 pm on selected instruments. Source: xStation