Dollar dominance was the name of the game after the US posted strong retail sales numbers.
How did the rest of the currencies and asset classes perform?
Let’s discuss the headlines:
Headlines:
- Australia MI July inflation expectations rise to 4.5% from 4.3%
- The Australian economy added 58.2 thousand jobs in July (20.2K estimate, previous reading revised to 52.3K from 50.2K); Unemployment rate rose to 4.2% from 4.1% instead of holding steady as participation rate rises
- Australia’s Leading Economic Index (LEI) fell from 0.3% m/m in May to -0.1% m/m in June.
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Chinese economic data It turned out mixed:
- Industrial production slowed to 5.1% in July from 5.3% year-on-year, versus 5.2% estimates.
- Retail sales rose 2.7% in July from 2.0% year-on-year, versus 2.6% expected.
- Fixed-asset investment slowed from 3.9% to 3.6% year-on-year in July, and the unemployment rate rose from 5.0% to 5.2%.
- The unemployment rate rose from 5.0% to 5.2% (5.1% expected) in July.
- New home prices fell 0.65% month-on-month in July after a 0.67% month-on-month decline in June.
- Japan’s industrial production was revised down from -3.6% m/m to -4.2% m/m in June.
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UK monthly GDP flat in June As expected after a 0.4% m/m rise in May; Q2 2024 preliminary GDP fell from 0.7% q/q to 0.6% q/q as expected
- The goods trade deficit rose from £18.6 billion to £18.9 billion in June.
- Industrial production rose from 0.3% m/m to 0.8% m/m (0.1% expected) in June; manufacturing output improved from 0.3% to 1.1% (0.2% expected)
- Initial business investment fell 0.1% quarter-on-quarter in Q2 2024 after rising 0.5% and versus the expected 0.4% increase.
- Producer prices in Switzerland Stagnant for second straight month versus expected 0.2% increase in July
- Canada Wholesale Sales June: -0.6% MoM (-0.6% Expected, -1.2% Previous)
- US Retail Sales Core retail sales jumped 1.0% month-on-month (vs. 0.4% expected) in July after falling 0.2% in June; Core retail sales grew 0.4% after an upwardly revised 0.5% growth in June
- Initial unemployment claims in the United States Decreased from 234K to 227K (236K expected) in the week ending August 10
- Empire State Manufacturing Index Improved from -6.6 to -4.7 (expected -5.9) in August
- Philadelphia Fed Manufacturing Index For August: -7.0 (5.4 expected, 13.9 prior)
- US import prices rose 0.1% month-on-month in July (vs. -0.1% expected, 0.0% prior reading)
- U.S. industrial production fell 0.6% month-on-month in July after a 0.3% gain in June; energy utilization rate fell from a downwardly revised 78.4% in June to 77.8% in July
- Reserve Bank of New Zealand Governor Orr He says that easing monetary policy is appropriate at the present time, and will be proceeded with caution.
- New Zealand’s food price index rose 0.4% month-on-month in July, compared with a previous 1.0% rise.
- New Zealand PPI Input Prices 1.4% QoQ (0.5% F, 0.7% PPI) Output prices up 1.1% QoQ (0.6% F, 0.8% PPI)
Price movement in the broad market:
Dollar Index, Gold, S&P 500, Oil, 10-Year US Treasury Yield, Bitcoin Chart by TradingView
The first trading sessions were very slow, with major asset classes moving in ranges during most of the trading hours in Asian and European markets.
Volatility began to rise as traders entered the US trading session, where crude oil prices rose amid a fresh wave of geopolitical tensions, although the commodity later clawed back some of its gains on reports that Israel had entered talks on halting attacks on Gaza.
Gold prices also started to rise, but the rally was halted when US data came in mostly better than expected. However, the decline was short-lived, as the precious metal managed to return to positive territory before the end of the session.
Meanwhile, Treasury yields posted big gains as upbeat U.S. spending reports and a strong weekly jobless claims figure prompted investors to scale back expectations for a larger 0.50% rate cut by the Federal Reserve in September.
U.S. stocks also held onto gains into the market close, as more signs of strength in the U.S. consumer sector eased fears of a full-blown recession. Stronger-than-expected earnings figures from Cisco and Walmart also allowed the indexes to extend their winning streak.
Forex Market Behavior: US Dollar vs Major Currencies:
Comparison between the US dollar and major currencies Chart by TradingView
It was a relatively busy day on the data front for the major currencies, with the schedule filled with preliminary GDP releases, the Australian jobs report, data from China, and US retail sales figures.
However, stronger-than-expected Q2 2024 growth figures from Japan did little to steer USD/JPY in a particular direction, while employment data from Australia spurred a rally in AUD/USD as fundamental metrics confirmed the strength of the labor market.
China’s numbers were mixed, with industrial production and fixed asset investment slowing while retail sales accelerated, but the Australian dollar managed to extend its upward march.
The UK also released monthly GDP data for June and preliminary growth figures for Q2, keeping the GBP/USD pair on a slow rise as the results came in mostly in line with expectations.
Other major currencies continued to move sideways until a U.S. retail sales report reflected stronger-than-expected consumer spending in July, tempering expectations for a further rate cut by the Federal Reserve next month. The dollar held onto gains against the yen and franc but eventually gave most of its gains back to the pound and the Australian dollar.
Potential catalysts coming up on the economic calendar:
- Japan Tertiary Industry Activity Index at 4:30 AM GMT
- UK Retail Sales 6:00 AM GMT
- Eurozone Trade Balance at 9:00 am GMT
- Housing Canada starts at 12:15 AM GMT
- Canadian Manufacturing Sales at 12:30 AM GMT
- US Building Permits and Housing Starts at 12:30 AM GMT
- University of Michigan Preliminary Consumer Confidence Index in the United States 2:00 PM GMT
- FOMC Member Goolsbee Testifies at 5:25 PM GMT
We have another potential driver of market sentiment in the form of University of Michigan Preliminary Consumer Confidence Index in the United Stateswhich is a leading indicator of spending activity. Keep in mind that investors are very concerned about the possibility of a recession these days, so any major surprises could lead to big price swings before the end of the week!