U.S. stocks and crude oil prices took their cues from individual catalysts on Wednesday and traded against their trends for the week.
Meanwhile, the US dollar fell amid speculation that Japanese officials were intervening in the currency.
Missed yesterday’s market headlines? We’ve got you covered!
headlines:
- Melbourne Institute’s Leading Australian Index held steady in June
- The UK consumer price index rate remained steady in June at 2.0% year-on-year but the rate of growth in service prices remains high
- UK Retail Price Index June: 2.9% MoM as expected (3.0% Previous)
- Eurozone Final CPI June: 2.5% as expected; Final Core CPI remains at 2.9%
- Foreign investment in Canadian securities exceeded Canadian investment in foreign securities for the second straight month in May.
- U.S. building permits rose from 1.40 million to 1.45 million (1.40 million expected) in June; housing starts rose from 1.31 million to 1.35 million (1.30 million expected)
- US Industrial Production June: 0.6% MoM (0.3% Expected, 0.9% Previous)
- FOMC voting member Thomas Barkin said he wants to “proceed deliberately” with interest rate changes and prefers policies “based on where we are today.”
- FOMC member Christopher Waller believes recent economic data is consistent with a “soft landing” and believes they are “getting closer” to a rate cut.
- The U.S. Energy Information Administration’s crude oil inventories fell by 4.9 million barrels in the week ending July 12, more than the expected draw of 3.4 million barrels and the expected draw of 0.9 million barrels.
- Using data collected through July 8, the Fed’s Beige Book report pointed to a slight improvement in employment, lower growth expectations, and weaker retail activity.
- Australia’s unemployment rate rose in June but underlying data pointed to strength in labour market
Price movement in the broad market:
Dollar Index, Gold, S&P 500, Oil, 10-Year US Treasury Yield, Bitcoin Chart by TradingView
The Asian trading session was largely quiet, with major assets remaining at their levels from the US session.
The plot thickened at the start of the European session when the yen suddenly rose, sparking rumors of currency intervention. While there was no official confirmation, Japan’s top currency diplomat, Masato Kanda, hinted at possible action, saying: “I have no choice but to take appropriate action against excessive volatility caused by speculation.“
Later, the market’s attention turned to escalating trade tensions between the US and China. Trump claimed that Taiwan had acquired “almost 100%” of America’s chip business, while a Bloomberg report highlighted Biden’s plans to impose tougher trade rules on chipmakers.
This has had a major impact on the semiconductor sector, leading to mixed results for US stock indices. The S&P 500 and Nasdaq saw significant declines, while the Dow managed to trade higher. Bitcoin (BTC/USD), usually considered a risky asset, also fell to around $64,000.
Meanwhile, the USD/JPY pair and the weakness of the US dollar pushed gold to fresh record highs at $2,483 before retreating to around $2,450. The yield on the 10-year US Treasury note also fell to multi-week lows at around 4.15%.
US crude oil prices were hit by a weaker dollar and a surprise drop in US crude inventories, reaching $82.80 before falling sharply by the end of the day.
Forex Market Behavior: US Dollar vs Major Currencies:
US Dollar Overlay Against Major Currencies Chart by TradingView
The US dollar traded in ranges early today despite weakening against the New Zealand dollar after the weaker-than-expected NZ CPI report.
During the European session, all eyes were on the USD/JPY pair which fell from 158.60 to 156.15 in a matter of hours. Although the currency intervention has not been confirmed, it is not certain either, right? We will know more at the end of the month when the Bank of Japan publishes its currency reports.
However, the US dollar was hit hard across the board and found little support until the US session. At that time, concerns over US-China trade tensions prompted investors to seek safer assets. The dollar continued to lose ground against other safe havens such as the Japanese yen and the Swiss franc, but managed to recover some of its losses against the euro, the pound and commodity currencies.
Potential catalysts coming up on the economic calendar:
- Swiss Trade Balance at 6:00 am GMT
- UK Jobs Data for June at 6:00am GMT
- ECB monetary policy decision at 12:15 pm GMT, followed by press conference at 12:45 pm GMT
- US Initial Jobless Claims at 12:30 PM GMT
- FOMC Voting Member Mary Daly will speak at 10:05 p.m. GMT
- GfK UK Consumer Confidence Report at 11:01pm GMT
- Japan National Core CPI at 11:30 PM GMT
- FOMC Member Michelle Bowman to Speak at 11:45 PM GMT
Traders are bracing for a busy European session with the UK releasing June labor market data while the European Central Bank delivers monetary policy updates.
There will be no major reports scheduled during the US session, so keep a close eye on market themes after the data release during the European trading session and overall risk sentiment.