Palladium prices rose on Tuesday even as dollar gained ground against most major rivals, but strong risk appetite underpinned industrial metals.

China cut its mainline one-year borrowing rates as expected this week amid efforts to boost credit demand.

Economists point to the high debt levels carried by several local governments in China, which constitute a significant risk to the economy.

Otherwise, the dollar index rose 0.3% to 103.5 as of 17:00 GMT, with a session-high at 103.7, and a low at 103.01.

A stronger dollar usually weighs on dollar-denominated metals and commodities as they become costlier to holders of other currencies.

Palladium is used extensively in the electronics and automotive industries for its ability to reduce exhaust fumes.

On trading, palladium futures due in December rose 2.2% as of 17:01 GMT to $1,270.5 an ounce. 

Oil prices declined on Tuesday in European trade on track for the second loss in a row on concerns about economic conditions in China and weaker fuel demand in the world's largest fuel importer. 

Now traders await initial data on US crude stocks today from the American Petroleum Institute, expected to show a drawdown for the second week in a row.

Global Oil Prices

US crude fell 0.7% to $79.65 a barrel, while Brent slid 0.6% to $83.90 a barrel, with a session-high at $84.59.

US crude lost 1.5% on Monday, while Brent shed 0.4%, the first loss in three days as investors shun high-risk assets. 

Global oil prices lost 2% last week, the first weekly loss in two months, snapping the longest streak of weekly gains since December 2021.

The reason is concerns about Chinese demand while US crude production increases. 

Chinese Economy

Weaker Chinese economic activities have disappointed the markets even as authorities vow to support the economy with a slew of measures.

Recently, the People's Bank of China cut main interest rates by 10 basis points from 3.55% to 3.45%. 

US Stocks

The American Petroleum Institute will report initial data on US crude stocks later today, expected to show a decline for the second week in a row. 

Euro declined in European trade against the pound on Tuesday, resuming losses after a two-day hiatus, and almost touching a five-week trough, amid renewed expectations of a widening interest rate gap between Europe and the UK, in the favor of UK. 

The European Central Bank remained split on the decision of interest rates at the September meeting, waiting for more European data to gauge the likely path ahead. 

EUR/USD fell 0.15% to 0.8529, with a session-high at 0.8545, after rising 0.1% yesterday, the second profit in a row, away from a five-week low at 0.8521. 

European Rates

The ECB recently linked any potential interest rate hikes in the future to upcoming data in the euro zone.

Investors await important European services and manufacturing data for August, in addition to a speech by ECB President Christine Lagarde at the Jackson Hall global forum.

UK Rates

Recent strong UK inflation data showcased the continuous inflationary pressures on Bank of England and the need to continue tightening monetary policies.

Such data bolstered the case for a 0.25% UK interest rate hike at the Bank of England's next September meeting. 

Interest Rate Gap

The current gap in interest rates between Europe and the UK stands at 100 basis points, and could increase to 125 basis points by the end of next month, in favor of Britain. 

US 10-year treasury yields surged on Tuesday for a second session, hitting a 16-year high on prospects of additional US interest rate hikes this year. 

Odds are also strong for US interest  rates to remain high for most of 2024 as the US economy proves flexible and strong while inflation remains off target.

Yields 

US 10-year treasury yields rose 0.4% to 4.360%, the highest since November 2007, with a session-low at 4.334%, after rising 2% on Monday, the seventh profit in eight days amid prospects US interest rates will remain high for longer. 

The Fed

The Federal Reserve's recent meeting minutes showcased the possibility of another interest rate hike this year depending on conditions.

The US economy continues to prove its strength and flexibility through solid data, which might pave the way for even more policy tightening. 

US Rates

Pricing for a 0.25% interest rate hike by the Fed at the September meeting rose from 10% to 16%, while odds for a 0.25% rate hike at the November meeting rose to 45%. 

A majority of economists polled by Reuters expect the Federal Reserve to raise interest rates to hike interest rates again this year.

Many investors hoped the recent interest rate in July would be the last but it might not be. 

Powell 

Fed Chair Jerome Powell is preparing to speak later this week at the Jackson Hall global forum alongside other global central bank governors.

Markets await important clues on the future path of policies and interest rates in the US.