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

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

When it was all said and done, the Nasdaq 100 rallied ~15%, extending gains from the previous quarter and capping its best first half of the year on record. The S&P 500 also fared extremely well by all metrics, but only climbed about 8.5%, hindered somewhat by the utilities, energy, and consumer staples negative performance. Bitcoin, for its part, regained ground after a selloff in May, finishing the quarter above $30,000 per token, one of its strongest levels in more than a year.

In the FX space, the U.S. dollar, as measured by the DXY index, eked out a tiny advance, driven mainly by weakness in the yen. Over the three-month period, USD/JPY soared 8.63% and briefly cracked the 145.00 mark, as Bank of Japan retained an ultra-dovish posture. Meanwhile, the British pound rose almost 3% against the U.S. dollar as UK inflation surprised to the upside repeatedly, forcing the Bank of England to extend its hiking cycle.

In the commodities market, gold (XAU/USD) initially strengthened and looked like it would establish fresh records, but failed to do so, and then began to sell off, falling nearly 2.5% over the second quarter. In terms of the catalysts at play, the precious metal was hit by rising yields in response to a hawkish repricing of the Fed’s monetary policy outlook amid persistently high inflation and resilient economic activity.

Looking ahead to the third quarter, the investment landscape may change and become more hostile for some assets. On the one hand, equities could come under pressure if the Federal Reserve makes good on its promise to deliver 50 basis points of additional tightening through year’s end. It would be extremely difficult for an economy in the late stage of the business cycle to withstand interest rates near 6.0% without cracking.

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

To learn more about how the major assets could behave over the next three months, take a look at the fundamental and technical forecasts prepared by DailyFX’s analysts and contributors. You can also request the complete trading guide for your market of interest by clicking on the download banner included in each of the articles below.

US Equity Benchmarks, Gold, Bitcoin and US Dollar Second-Quarter Performance Chart

Fundamental Forecasts:

Gold Q3 Forecast: Central Bank Hawkish Outlook Spells Trouble for XAU/USD

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

US Dollar Q3 Fundamental Outlook – It’s All About Data

US inflation is moving lower but remains uncomfortably high, helped in part by a robust US job market

Equities Q3 Fundamental Outlook: Uptrend Solidifies as Fear of Missing Out Effect Sets In

The spectacular run in US equities looks set to spill over in the third quarter, thanks to improving overall sentiment after the raising of the US debt ceiling, reduced stress in the banking system, the resilience of the US economy, and hopes that global interest rates are peaking

The British Pound Q3 Fundamental Outlook – Rates and Recession

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

Technical Forecasts:

Japanese Yen Q3 Technical Forecast: USD/JPY and EUR/JPY on Bullish Paths

USD/JPY and EUR/JPY maintain a positive technical outlook heading into the third quarter, as sentiment around the Japanese yen continues to be extremely bearish.

Crude Oil Q3 Technical Forecast: Brent Bulls Lick Their Lips

Oil technicals enter Q3 on the back of a broad consolidation where an upside breakout eyes the long-term trendline and $80 mark

Euro Technical Forecast: Bullish Drivers Diminish

The euro is showing signs of weakness heading into Q3 – key levels identified and analyzed

Bitcoin Q3 Fundamental Forecast: Still Standing After Regulatory Woes and Higher Rates

Bitcoin’s resilience bodes well for Upside in Q3 as skyrocketing interest rates and regulatory headwinds fail to bring about a selloff

Australian Dollar Q3 Technical Forecast: Ranges Holding for Now

A feature of many asset classes in 2023 has been a range trading type of environment and AUD/USD is an example of this. At the half-way point of the year, the Aussie Dollar is yet to get anywhere near testing the 2022 high or low at 0.7660 and 0.6170 respectively.

Article Body Written by Diego Colman, Contributing Strategist for DailyFX.com

— Individual Articles Composed by DailyFX Team Members