Fed Policy in Focus as US Capital Goods Orders See Strong Growth

The Federal Reserve enters its July policy meeting facing a 'close call' as a growing number of major brokerages speculate on the potential for a rate pivot. While professional forecasters remain divided on whether the central bank will hold steady or initiate a cut, recent data showing a rise in US core capital goods orders suggests the underlying economy remains resilient despite high borrowing costs.

Shipments of non-defense capital goods, excluding aircraft, posted their largest gain in months during June, indicating that business investment is holding up. This resilience complicates the Fed's decision-making process, as officials weigh the need to cool lingering inflation against the risk of keeping rates restrictive for too long. Market analysts like John Authers suggest the Fed may find itself 'stuck' if inflation data does not show a more definitive path toward the 2% target.

Concurrently, the International Monetary Fund has signaled some global stability by completing its final review of Ghana’s lending program, unlocking $371 million for the nation. However, the primary focus for global markets remains the FOMC's Wednesday announcement, with traders pricing in a high probability of a dovish shift in tone, even if the headline rate remains unchanged this month.