Profit-taking was the name of the game on Thursday as major assets reversed their trends for the week ahead of Powell’s keynote speech on Friday.
Spot gold and the S&P 500 continued to trade lower near record highs, while U.S. bond yields and the U.S. dollar recovered despite mixed U.S. data.
What topics dominated the markets and how were your favorite assets traded?
Headlines:
- flash bank judo Australia Manufacturing PMI The services sector PMI rose from 50.4 to 52.2, its highest level in three months in August.
- African Union Bank Gibbon Flash Japan Manufacturing PMI rose from 49.1 to 49.5 in August; employment growth slowed; selling price inflation fell to lowest since November
- HCOB flash France Manufacturing PMI The services PMI fell from 44.0 to an eight-month low of 42.1 in August; the services PMI rose from 50.1 to a 27-month high of 55.0
- HCOB flash Germany Manufacturing PMI The services PMI fell from 43.2 to a five-month low of 42.1 in August; the services PMI expanded at a weaker pace, falling to 51.4 from 52.5.
- HCOB flash Eurozone Manufacturing PMI The services PMI fell from 45.8 to an eight-month low of 45.6 in August; the services PMI rose from 51.9 to a four-month high of 53.3.
- S&P Global PMI UK Private sector showed strong expansion in August
- ECB meeting minutes He noted that September is “a good time to reassess” monetary policies “with an open mind.”
- Initial unemployment claims in the United States Week ending August 17: 232K as expected (228K previously)
- S&P World Index US Manufacturing PMI The services PMI fell from 49.6 to an eight-month low of 48.0 in August; the services PMI improved from 55.0 to a two-month high of 55.2
- US Existing Home Sales July: 3.95 million (3.94 million expected, 3.90 million previously)
- Retail Sales in New Zealand Q2 2024: -1.2% QoQ (-1.0% expected, 0.4% previously); Core Retail Sales at -1.0% QoQ (-0.8% expected, 0.3% previously)
- UK GfK Consumer Confidence Index It remained at -13 (-12 expected) in August as confidence improved but economic expectations fell for the first time since February.
- Japan National Core CPI Growth accelerated from 2.6% y/y to 2.7% y/y as expected in July
Price movement in the broad market:
Dollar Index, Gold, S&P 500, Oil, 10-Year US Treasury Yield, Bitcoin Chart by TradingView
The minutes from the Federal Open Market Committee meeting that indicated a possible interest rate cut in September did not provide much of a boost to Bitcoin (BTC/USD) or crude oil prices on Thursday morning. Bitcoin struggled after hitting technical resistance, while crude oil continued its slide from the previous session.
Most other major assets remained fairly quiet early in the day, with global PMI reports the main focus. The data was mixed, but with the exception of the UK release, it didn’t move the needle much for major markets.
US 10-year Treasury yields started to rise during the early European session, likely due to investors moving away from US bonds ahead of Powell’s big speech on Friday.
The cautious mood continued in the US session, with data also mixed. Initial jobless claims came in higher than expected, but the US services PMI surprised everyone. Overall, the labor market appears to be cooling, but it’s still hot enough to keep the Fed on its toes.
Bitcoin fell to $60,200, the S&P 500 fell sharply after nearing its mid-July high, and gold extended its slide after hitting new record highs earlier this week. West Texas Intermediate crude bucked the trend, jumping from $71.60 to $73.45, likely on short-covering and optimism about a Fed rate cut.
Forex Market Behavior: US Dollar vs Major Currencies:
Comparison between the US dollar and major currencies Chart by TradingView
The US dollar snapped a weekly loss, benefiting from what appeared to be a round of profit-taking that boosted demand for the greenback.
Asian session traders followed the previous US session’s lead, pushing the dollar higher despite the release of dovish FOMC minutes. However, heading into the European session, the dollar gave up some of its gains as traders awaited the European PMI reports.
As expected, France’s private sector PMI got a boost from the Paris Summer Olympics. Meanwhile, Germany’s PMIs came in much weaker than expected, but talk that the ECB’s rate cut was already calculated helped limit the euro’s losses after the reports.
Then the focus shifted to US data during the US session. Initial weekly jobless claims came in higher than expected, but new home sales improved, and the S&P Global Services PMI showed faster-than-expected expansion.
With the US labor market strengthening, speculation has grown that Powell could deliver a hawkish speech on Friday. This speculation, coupled with a profit-taking environment, helped push the US dollar to close above its opening levels today.
Potential catalysts coming up on the economic calendar:
- Bank of Japan Governor Ueda to deliver speech at 4:00 AM GMT
- FOMC Member Raphael Boucek to Speak at 12:00 PM GMT
- Canada Retail Sales 12:30 PM GMT
- Canadian quarterly corporate earnings at 12:30 PM GMT
- Fed Chair Powell to Deliver Keynote Speech in Jackson Hole at 2:00 PM GMT
- US New Home Sales at 2:00 PM GMT
- Bank of England Governor Andrew Bailey will speak at 3:00pm GMT.
- FOMC Member Austin Goolsbee will speak at 4:30 p.m., 5:45 p.m., and 6:15 p.m. GMT.
Central bankers will take center stage as the Jackson Hole symposium heats up. A keynote address by J. P. Bowe will be the headline event, although speeches by Bank of England Governor Bailey and FOMC members Boucek and Goolsbee could also inspire a repricing of interest rate biases.
Meanwhile, Canada will release retail sales data for June, where we could see slightly slower declines in retail activity compared to May.
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