Gold, Oil, S&P 500, US Dollar, Euro, Pound, Yen, AUD, BTC

Risk appetite improved further during the second quarter, as the US economy defied expectations and held up remarkably despite continued central bank tightening. The strength of the US labor market kept household consumption levels stable, preventing, once again, the onset of a recession. At the same time, the advent of “artificial intelligence” has awakened the animal spirits of Wall Street, sending stocks, particularly those in technology, to dizzying heights.

When all was said and done, the Nasdaq 100 rose 15%, extending the gains from the previous quarter and capping off its best first half of the year ever. The S&P 500 did very well by all accounts, but only gained 8.5%, held back somewhat by negative utilities, energy and consumer goods performances. Bitcoin, for its part, regained ground after a May sell-off, ending the quarter above $30,000 per token, one of its strongest levels in more than a year.

In the foreign exchange space, the US dollar, as measured by DXY, made a slight advance, mainly driven by a weaker yen. Over the three-month period, the USD/JPY pair rose by 8.63% and briefly breached the 145.00 level, as the Bank of Japan maintained a very dovish stance. Meanwhile, the British Pound rose nearly 3% against the US dollar as British inflation surprised the bullish trend again and again, forcing the Bank of England to extend its rally cycle.

In the commodities market, Gold (XAU/USD) initially consolidated and looked like it was going to hit new records, but failed to do so and then started to sell off, dropping around 2.5% over the second quarter. In terms of the catalysts at hand, the precious metal has been hurt by rising yields in response to an aggressive repricing of the Federal Reserve’s monetary policy outlook amid persistently high inflation and resilient economic activity.

Looking into the third quarter, the investment landscape may change and become more hostile for some assets. On the other hand, stocks could come under pressure if the Federal Reserve makes good on its promise to deliver 50 basis points of additional tightening through the end of the year. It would be very difficult for an economy in the last phase of the business cycle to tolerate interest rates close to 6.0% without going broke.

Gold, for its part, could remain vulnerable in the short term before stabilizing at the end of the summer. With major central banks poised to raise borrowing costs several times at upcoming policy meetings as part of their efforts to curb inflation, nominal and real rates could remain biased to the upside, hurting non-yielding assets such as gold and silver.

To learn more about how major assets will behave over the next three months, take a look at the fundamental and technical forecasts prepared by DailyFX analysts and contributors. You can also order the complete trading guide for the market you are interested in by clicking on the download banner embedded in each of the articles below.

US stock indices, gold, bitcoin and US dollar performance chart for the second quarter

Basic expectations:

Q3 Gold Forecast: Upbeat central bank expectations cause problems for the Gold/USD pair

The recent rise in nominal and real yields driven by the central bank’s tightening monetary policy could keep gold prices biased to the downside heading into the third quarter.

Fundamental Outlook for the US Dollar in the Third Quarter – It’s all about the data

US inflation is trending down but remains uncomfortably high, supported in part by a strong US labor market.

Q3 Equity Fundamental Outlook: Uptrend Consolidates as Fear of Loss of Impact Grows

It seems that the amazing stampede in US stocks will spread in the third quarter, thanks to the improvement in general sentiment after the raising of the US debt ceiling, reducing pressure in the banking system, the resilience of the US economy, and the hope of global interest rates. peaked

British Pound Fundamental Outlook for Q3 – Rates and Recession

The Bank of England is trying to balance future interest rate hikes against a potential recession

Technical outlook:

JPY Technical Outlook for the Third Quarter: USD/JPY and EUR/JPY on bullish tracks

USD/JPY and EUR/JPY maintain a positive technical outlook heading into the third quarter, as sentiment around the Japanese yen remains very bearish.

Third Quarter Crude Oil Technical Outlook: Brent bulls licking their lips

Oil technicians enter Q3 on broad consolidation as the bullish breakout targets the long-term trend line and $80 mark

Technical Outlook for the Euro: The bullish drivers are declining

Euro is showing signs of weakness heading into Q3 – key levels identified and analysed

Bitcoin Core Q3 Outlook: Still Standing After Regulatory Troubles and Price Rally

Bitcoin’s resilience bodes well for the Upside in Q3 as higher interest rates and regulatory headwinds fail to trigger a sell-off

Third Quarter Australian Dollar Technical Outlook: Holding Ranges Right Now

A feature of many asset classes in 2023 has been a range trading type of environment, AUD/USD being an example. At the midway point of the year, the Australian dollar is not yet close to testing the 2022 high or low at 0.7660 and 0.6170 respectively.

Article text by Diego Coleman, Contributing Strategist at DailyFX.com

— Individual articles written by members of the DailyFX team