Markets have been pricing in recession fears, sending prices of several major assets higher on Thursday.
What headlines helped boost market sentiment yesterday?
We break them down for you:
Headlines:
- RICS: Scale UK house prices rise It reached -19% in July, which is more negative than the -17% reading in June.
- Japan’s bank lending rate held steady at 3.2% y/y as expected in July
- Bank of Japan Opinion Summary The survey results showed that members discussed further interest rate hikes and painted a picture of a more hawkish bias for the central bank.
- Japan’s current account surplus narrowed to 1.78 trillion yen (expected 2.34 trillion) in June from 2.41 trillion yen.
- In his speech, Reserve Bank of Australia Governor Bullock The Central Bank said,He will not hesitate to raise prices if necessary.“
- Kiwi has been enhanced as well. New Zealand Quarterly Jobs Report I was surprised by the positive side.
- Japan’s economic watchers’ confidence improved from 47.0 to 47.5 in July
- Initial weekly jobless claims in the United States fell from 250,000 to 233,000 (241,000 expected) in the week ending August 3.
- FOMC Voting Member Tom Barkin He said inflationary elements “appear to be stabilizing” but the Fed has “some time” to figure out its policy path.
Price movement in the broad market:
Dollar Index, Gold, S&P 500, Oil, 10-Year US Treasury Yield, Bitcoin Chart by TradingView
With little in the way of major data or game-changing news, financial markets moved in wide ranges during the early Asian and European sessions.
Bitcoin (BTC/USD) saw some volatility, breaking above the $56,000 support level, kicking off an intraday uptrend that pushed the native cryptocurrency to near $63,000 by the end of the day. Meanwhile, WTI crude oil prices had a strong day, finding support at around $74.75 during the European session — likely due to growing concerns over tensions in the Middle East.
The mood turned more positive during the US trading session after the latest weekly report on initial jobless claims showed a decline of 17,000 from the previous week. The data highlighted the strength of the US labor market, prompting some traders to start pricing in a slowdown rather than a full-blown recession.
The upbeat labor market news helped boost 10-year Treasury yields and gave U.S. stocks a boost. The S&P 500 index rose to fresh weekly highs, its strongest day since November 2022, while the 10-year Treasury yield rose from 3.89% to 4.02%.
Forex Market Behavior: US Dollar vs Major Currencies:
US Dollar Overlay Against Major Currencies Chart by TradingView
The US dollar had a mixed start to the day, reacting to some yen-related volatility after the Bank of Japan issued a hawkish summary of sentiment.
The US dollar also lost ground against the Australian dollar. RBA Governor Bullock responded to calls for rate cuts, saying they don’t expect inflation to return to target until late 2025. She also stressed that they “will not hesitate to raise rates” if necessary. What a surprise!
The US dollar did not make any major moves until the US session kicked off with the Initial Jobless Claims report. Signs of continued strength in the US labor market helped the dollar recoup some losses against other safe-haven currencies such as the Swiss franc and the Japanese yen. However, the more risk-friendly environment that followed weighed on the dollar against “riskier” currencies such as the Australian dollar, the New Zealand dollar, the Canadian dollar and the British pound.
Potential catalysts coming up on the economic calendar:
- Germany Final CPI at 6:00 AM GMT
- SECO Swiss Consumer Climate Index at 7:00 am GMT
- Italian Trade Balance at 9:00 am GMT
- Canada Labor Market Data 12:30 PM GMT
The Euro and Canadian Dollar are likely to get more attention in the next few hours with Germany releasing its final CPI reading during the European session and Canada dropping its July employment data during the US session.
Canada’s labour market numbers could influence the Bank of Canada (BOC) biases, so make sure you’re glued to the TV during the release if you don’t want to miss out on any potential changes in CAD appetite!