Risk-on sentiment appears to be in place in financial markets, with stocks and commodities closing higher while bond yields and the dollar took a hit.
What is driving these asset classes lately?
Here are the market updates you need to know:
headlines:
- China’s core CPI slowed to 0.2% in June from 0.3% year-on-year, versus an expected 0.4% rise.
- China’s producer price index fell 0.8% year-on-year in June, as expected, versus a previous decline of 1.4%.
- The Reserve Bank of New Zealand left interest rates unchanged at 5.50%. For the eighth consecutive month in the decision to “maintain the cautious policy”
- OPEC raises global economic growth forecast For 2024, it is slightly higher at 2.9% and kept its forecast for oil demand growth at 2.2 million barrels per day for this year.
- Italian Industrial Production in May: 0.5% MoM (0.0% Expected, -1.0% Previous)
- Bank of England Chief Economist Hugh Bell He said the timing of interest rate cuts remained an “open question” due to persistent inflation.
- Fed Chairman Powell He stressed that he was not yet confident that inflation would return to the 2% target, adding that there was “more work to be done” to push price pressures down.
- The U.S. Energy Information Administration’s crude oil inventories showed a decline of about 3.4 million barrels, compared to an expected increase of about 0.7 million barrels, and a previous decline of about 12.2 million barrels.
- Bank of England Monetary Policy Committee Member Catherine Mann He warned that the supply side of the economy was growing too slowly.
- New Zealand’s food price index rose 1.0% month-on-month in June, compared with a previous 0.2% decline.
- UK house price stock remains 17% lower than expected 14% fall
- Japan’s core machinery orders slowed from a 2.9% year-on-year decline to a 3.2% decline versus an expected 0.9% rise.
Price movement in the broad market:
Dollar Index, Gold, S&P 500, Oil, 10-Year US Treasury Yield, Bitcoin Chart by TradingView
Financial markets had a mixed start, with crude oil still in a sell-off during Asian market hours while Bitcoin surged to the $59,000 area early in the day.
Treasury yields had a tough time as traders continued to assess the implications of Powell’s comments on the timeline for the central bank’s easing, and remained in the red for most of the day.
Meanwhile, crude oil prices managed to recover when OPEC raised its global growth forecast, and also when the US Energy Information Administration report revealed another decline in inventories instead of the expected increase.
Gold rose in the early part of the day before retreating after Powell’s congressional testimony, as traders are likely to start taking profits ahead of today’s highly anticipated US CPI report.
U.S. stocks posted another stellar performance, helped by big gains in Nvidia and semiconductor stocks, as well as bolstered expectations of a Federal Reserve interest rate cut in September.
Forex Market Behavior: US Dollar vs Major Currencies:
US Dollar Overlay Against Major Currencies Chart by TradingView
Price action across the USD pairs was a bit mixed compared to the previous day, with the NZD and GBP having their own individual catalysts to contend with.
Early in the Asian session, the Reserve Bank of New Zealand announced a decision to “maintain quantitative easing” citing that domestic growth and inflationary pressures are easing, raising doubts about the central bank’s ability to maintain its tightening policy for much longer. Unsurprisingly, the NZD/USD pair retreated and remained in the red for the rest of the trading day.
On the other hand, the British pound managed to get a boost during the London trading hours from surprise comments made by the Bank of England’s chief economist Bill, who said that a potential interest rate cut was not yet a done deal.
Fed Chairman Powell’s testimony before Congress did not set the tone for the US dollar, as his comments were mostly a reiteration of what he had already said in the Senate the day before. However, the US dollar managed to maintain its advance against the yen and the franc while ending the day slightly lower against the Canadian, Australian and euro dollars.
Potential catalysts coming up on the economic calendar:
- UK monthly GDP at 6:00 am GMT
- UK Industrial Production at 6:00am GMT
- Bank of England Credit Situation Survey at 8:30am GMT
- US Headlines and Core CPI 12:30 PM GMT
- US Initial Jobless Claims at 12:30 PM GMT
- FOMC Member Posic Speaks at 3:30 PM GMT
- FOMC Member Musallam Speech, 5:00 PM GMT
- New Zealand Manufacturing Index at 10:30pm GMT
Today’s market is focused on US CPI Report for Juneas the numbers could make or break expectations for a September rate cut. Be prepared for more volatility across the USD pairs, especially if the numbers come in significantly above or below consensus.