Markets began the week pricing in an assassination attempt on Trump over the weekend, but price action quickly took cues from speculation of a Fed rate cut.
Which assets benefited from the momentum, and which assets saw losses today?
We have a summary for you!
headlines:
- BusinessNZ Services Index in June: 40.2 (previous reading down from 43.0 to 42.6)
- Rightmove UK House Price Index July: -0.4% m/m (previously 0.0%)
- China’s GDP slowed to 4.7% y/y in Q2 2024 from 5.3% y/y versus 5.1% forecast; Industrial production slowed to 5.3% y/y from 5.6% y/y versus 4.9% forecast in June
- Producer prices in Switzerland were flat (0.1% expected) in June after a 0.3% decline in May.
- Eurozone industrial production fell by 0.6% in May; April output revised up from -0.1% to 0.0%
- Canada manufacturing sales slowed from an upwardly revised 1.4% in April to 0.4% in May (vs. 0.3% expected).
- Empire State Manufacturing PMI July: -6.6 (-5.5 expected, -6.0 previously)
- Fed Chair Powell said second-quarter CPI readings added to their confidence that inflation is slowing, and hinted they would not wait until it hits 2% before cutting interest rates.
- Federal Open Market Committee member Mary Daly said inflation is “approaching” a sustainable path to 2%, but declined to set a timetable for rate cuts.
Price movement in the broad market:
Dollar Index, Gold, S&P 500, Oil, 10-Year US Treasury Yield, Bitcoin Chart by TradingView
With Japan on bank holiday, Asian traders started the week pricing in a Trump assassination attempt over the weekend. The rising odds of a Trump win sent Bitcoin (BTC/USD) and the US dollar higher, and also weighed on spot gold and crude oil prices.
The moves were short-lived as markets priced in the Fed’s rate cut. Gold retested its July highs and hit new highs near $2,439 before settling at $2,420. Bitcoin extended gains to $64,000 and U.S. stocks touched record highs while U.S. Treasury yields saw limited gains.
Crude oil was an exception as it remained below $82.50, especially after weaker-than-expected Chinese GDP data raised concerns about global demand.
Forex Market Behavior: US Dollar vs Major Currencies:
Comparison between the US dollar and major currencies Chart by TradingView
The growing likelihood of Trump winning the presidency after an assassination attempt on him over the weekend has supported the US dollar on a strong footing against some of its peers.
The strength of the US dollar did not last long as traders in the Asian session quickly returned to pricing in early and possibly multiple interest rate cuts by the Federal Reserve this year.
The dollar came under fresh downward pressure during the early European session and then again at the start of the US session before Powell’s speech helped push the currency higher.
Whether it was profit-taking or increased demand for U.S. stocks, the dollar rose even after Powell hinted that the Federal Reserve would not wait for inflation to reach 2% before cutting interest rates.
Potential catalysts coming up on the economic calendar:
- Italian Trade Balance at 9:00 am GMT
- Eurozone Trade Balance at 9:00 am GMT
- Eurozone ZEW Economic Sentiment at 9:00 am GMT
- German ZEW Economic Sentiment at 9:00 am GMT
- Canada housing starts at 12:15 p.m. GMT
- Canada Inflation Report at 12:30 PM GMT
- US Retail Sales 12:30 PM GMT
- US Business Inventories at 2:00 PM GMT
- NAHB US Housing Market Index at 2:00 PM GMT
- New Zealand Quarterly CPI at 10:45pm GMT
Currencies like the Euro, Canadian Dollar and New Zealand Dollar can take their cues from more than just the broader market themes of the day!
Keep a close eye on economic confidence reports from the Eurozone, while Canada and New Zealand release their latest inflation reports.