Daily Broad Market Recap – October 16, 2024

Major currencies and asset classes appear to be taking their cues from their individual catalysts, with UK inflation data and the “Trump trade” taking center stage.

Crude Oil saw its usual downward trajectory, although the energy commodity managed to limit its losses in recent sessions compared to the sharp sell-off seen earlier in the week.

Below are the updates that have been driving price action recently.

Titles:

• New Zealand Q2 2024 Consumer Price Index At 0.6% (0.7% expected, 0.4% previous), the annual reading fell from 3.3% to 2.2% marking the first time the RBNZ target range has been reached in over 3 years.
• Member of the Board of Directors of the Bank of Japan Adachi He said conditions were already in place for the normalization of monetary policy, but stressed that the central bank should raise interest rates at a “very moderate” pace.
• Core machinery orders in Japan for August fell 1.9% m/m in August (0.1% expected, -0.1% previously)
• Annual headline UK CPI It decreased from 2.2% to 1.7% (1.9% expected); Core CPI slowed from 3.6% to 3.2% (3.4% expected).
• UK monthly PPI input prices fell faster, from -0.3% to -1.0% (-0.5% expected) in September; PPI output prices fell further from -0.3% to -0.5% (-0.3% expected)
• UK Retail Price Index fell from 3.5% y/y to 2.7% y/y (3.1% expected) in September
• UK house price index accelerated from 1.8% y/y to 2.8% y/y (2.5% expected) in September
• US import prices fell by 0.4% m/m in September versus the expected decline of 0.3%, and the previous decline of 0.2%.

Broad market price movement:

Major asset classes today began to diverge in different directions, with crude oil poised to continue its decline while gold and Bitcoin advanced.

Although investors continue to monitor geopolitical tensions in the Middle East, oil traders still appear to be tempering global supply concerns after Israel recently pledged to avoid attacking Iranian production facilities.

However, WTI rose briefly during the start of the London session after the American Petroleum Institute announced a draw of 1.58 million barrels from inventories, before resuming its decline and then trimming its losses to just 0.40% for the day.

Meanwhile, US stock indices found themselves slightly in the green, thanks to positive earnings data from Morgan Stanley, Abbott, and Nvidia. Gold prices remained higher for much of the day, likely reflecting unease in the markets which also led to a rise in other safe havens such as government bonds and the US dollar.

Forex market behavior: US dollar against major currencies:

Overlay of the US dollar against major currencies Chart by TradingView

Price action between the major currency pairs also deviated from the start, with the New Zealand dollar recording sharp losses after witnessing weaker-than-expected quarterly CPI data from New Zealand. Its friend, the Australian dollar, lagged behind, also falling as Chinese stimulus hopes faded.

On the flip side, the Japanese yen got a little support from hawkish comments from Bank of Japan official Adachi who indicated that economic conditions are ready for policy normalization (aka interest rate hikes) but they plan to tighten gradually.

During the London session, the pound fell across the board after seeing UK inflation numbers come into the red, as weaker-than-expected CPI and PPI data raised the odds of further interest rate cuts from the Bank of England. After a bit of profit taking, the British pound remained heavy throughout the day, which led to GBP closing down 0.65%, followed by NZD/USD and AUD/USD which finished around 0.50% in the red.

The dollar also finished in the green against the rest of its peers, with polls showing Trump’s presidential odds rising, with the exception of the Canadian dollar where USD/CAD closed 0.17% lower.

Potential catalysts coming on the economic calendar:

• Japan’s third industrial activity index at 4:30 AM GMT
• Swiss trade balance at 6:00 am GMT
• Eurozone headline and core CPI at 9:00 AM GMT
• Monetary policy decision of the European Central Bank 12:15 pm GMT
• US address and basic retail sales 12:30 pm GMT
• Initial unemployment claims in the United States 12:30 pm GMT
• US Philadelphia Fed Index at 12:30 PM GMT
• Press conference of European Central Bank President Lagarde 12:45 pm GMT
• US Industrial Production and Capacity Utilization at 1:15 PM GMT
• EIA Crude Oil Inventories at 3:00 PM GMT
• FOMC Member Goolsbee’s speech at 3:00 PM GMT

It’s a busy economic calendar today, with the European Central Bank’s (ECB) monetary policy decision in the spotlight!

Rate cut expectations have been in the works for some time, but keep an eye out for any surprises or change in rhetoric that could impact future policy expectations and Euro trends.

Next, stay alert for US dollar fluctuations near the release US retail sales and initial unemployment claims data.

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