A bit of calm has returned to the financial markets over the past few trading sessions, but we are still seeing significant movements between some major currencies and asset classes.
Bitcoin saw a big rebound, closing up around 5% on the day while Treasury yields also made good gains.
Here’s a quick summary of the headlines and economic updates that impacted the markets:
headlines:
- ANZ Bank Australia Job Ads Decreased 3.0% month-on-month in July versus the previous 2.7% decline (reduced from the initially reported 2.4% decline).
- The Reserve Bank of Australia left interest rates unchanged at 4.35% in a “hawkish” decision.Policymakers also noted that “inflation remains too high and is falling more slowly than expected.”
- Switzerland’s unemployment rate rose from 2.4% to 2.5% in July, as expected.
- German factory orders rose 3.9% month-on-month in June, compared with an expected 0.4% rise and a previous 1.7% decline.
- Swiss retail sales fell by 2.2% year-on-year in June (+0.5% expected, previous reading down from +0.4% to -0.2%)
- UK Construction PMI July: 55.3 (F 52.5, Previous 52.2)
- New Zealand GDT auction sees 0.5% increase in dairy prices (0.4% previously)
- New Zealand employment change in Q2 2024: +0.4% QoQ (-0.2% expected, previous reading revised down from -0.2% to -0.3%)
- New Zealand unemployment rate in Q2 2024: 4.6% (4.7% expected, previous reading revised from 4.3% to 4.4%)
- New Zealand Labour Cost Index Q2 2024: 0.9% QoQ (0.8% expected, 0.8% prior)
Price movement in the broad market:
Dollar Index, Gold, S&P 500, Oil, 10-Year US Treasury Yield, Bitcoin Chart by TradingView
The panic that gripped markets on Monday appeared to have subsided during Tuesday’s Asian trading session, with commodities such as gold and crude oil trading sideways while Treasury yields rose.
Bitcoin got off to a strong start, bouncing off the $54,000 area early in the session and trading around $56,000 before pulling back to $55,000 in early London market hours. Another rally followed as traders in the US session arrived at their desks, sending BTC/USD past its intraday highs to close up around 3% on the day.
Meanwhile, crude oil managed to recover during the New York session, thanks to a report from the US Energy Information Administration indicating that global inventories fell by about 400,000 barrels per day in the first half of the year, which added to ongoing supply concerns due to geopolitical risks. However, this was not enough to return the commodity to positive territory as risk flows continued.
In the US stock market, indices ended a three-day decline, with the S&P and Nasdaq closing in the green, even after paring most of their strong gains earlier in the session.
Forex Market Behavior: US Dollar vs Major Currencies:
US Dollar Overlay Against Major Currencies Chart by TradingView
The dollar price action was all over the place on Tuesday, with USD/JPY having its usual activity – this time in terms of carry trade liquidation – while some of the majors had individual catalysts to respond to.
The Australian dollar made some gains after the Reserve Bank of Australia announced a “hawkish stance,” as the central bank left interest rates unchanged as expected but also warned that inflation remained higher than expected. The AUD/USD pair ended up retracing the gains made after the RBA decision before the US session, before joining the rest of the commodity currencies in benefiting from risk appetite.
On the other hand, the British pound ended today’s trading as the weakest on record, despite the release of the UK construction sector PMI, which came in stronger than expected, while similar European currencies also closed in negative territory.
Potential catalysts coming up on the economic calendar:
- China’s trade balance coming
- German Industrial Production and Trade Balance at 6:00 AM GMT
- Swiss National Bank foreign exchange reserves report at 7:00 am GMT
- Canadian Ivey PMI 2:00 PM GMT
- US Energy Information Administration Crude Oil Inventories at 2:30 PM GMT
- Summary of the deliberations of the Central Elections Committee 5:30 PM GMT
- Bank of Japan Opinion Summary at 11:50 PM GMT
There’s not much on the agenda in terms of the usual array of top-tier catalysts today, although the Chinese trade balance is worth a look when it comes to gauging overall market sentiment.
Other mid-level reports to watch include Canada’s Ivey Purchasing Managers’ Index, which serves as a leading indicator of employment and inflation, as well as the Bank of Canada’s summary of deliberations or central bank meeting minutes, which may have clues to future policy moves.