High-yielding assets got off to a strong start, but ended up falling as the US dollar and bond yields regained the upper hand.
What happened in the markets recently?
Here are the updates you need to know:
headlines:
- Employment Change in Australia in June: +50.2K (19.9K expected, 39.5K prior), Unemployment rate rose from 4.0% to 4.1% as expected
- NAB Australia Quarterly Business Confidence Index Q2 2024: -1 (previous -2)
- Swiss trade balance in June: CHF 6.18 billion (CHF 5.05 billion forecast, CHF 5.79 billion previously)
- UK unemployment claimants change in June: 32.3k (23.4k expected, previous reading revised from 50.4k to 51.9k), unemployment rate steady at 4.4% as expected
- The UK average earnings index slowed from 5.9% to 5.7% in the three months to May as expected.
- The European Central Bank left interest rates unchanged as expected. With an emphasis on a data-driven approach
- During the press conference, Lagarde highlighted the downside risks to the growth outlook and cited the potential decline in labor cost inflation if productivity slows.
- US Initial Weekly Jobless Claims: 243K (229K expected, 223K prior), highest since August of last year
- US Philadelphia Fed Manufacturing Index in July: 13.9 (2.7 expected, 1.3 previously)
- FOMC member Daly noted that she sees inflation data as positive but not yet on target.
- UK GfK Consumer Confidence Index in July: -13 (-12 expected, -14 previously)
- Japan National Core CPI June: 2.6% YoY (2.7% expected, 2.5% prior)
Price movement in the broad market:
Dollar Index, Gold, S&P 500, Oil, 10-Year US Treasury Yield, Bitcoin Chart by TradingView
Risk assets had a relatively good start during Asian market hours, with commodities and cryptocurrencies rising for most of the trading session.
However, WTI crude oil prices fell to $81.85 a barrel and continued to decline for the rest of the day, as concerns about a slowing US economy persisted. Gold also fell, closing down more than 0.50% on the day, while Bitcoin found itself back below the $64,000 level.
U.S. stock indexes posted back-to-back daily losses, despite gains in the utilities and energy sectors, as chipmakers and broader technology companies reversed earlier gains.
Forex Market Behavior: US Dollar vs Major Currencies:
US Dollar Overlay Against Major Currencies Chart by TradingView
On the other hand, the US dollar managed to break its three-day losing streak, ending today’s trading on a positive note across the board despite the absence of high-level US data.
Initial weekly jobless claims came in weaker than expected, with the report pointing to a larger increase in unemployment over the reporting period. Other first-tier catalysts failed to generate significant movement, with the UK posting weaker-than-expected employment data and the European Central Bank leaving interest rates unchanged as expected.
Only the USD/JPY pair has gone off course as usual, with yen traders likely to remain in awe of the recent volatile moves. However, data from the Bank of Japan showed no evidence of central bank intervention in mid-July, allowing USD/JPY to reclaim the top spot among dollar pairs.
Potential catalysts coming up on the economic calendar:
- UK Retail Sales at 6:00am GMT
- Eurozone current account balance at 8:00 am GMT
- Canadian Headlines and Core Retail Sales at 12:30 PM GMT
- Australia CB Leading Index at 2:30pm GMT
- FOMC Member Williams Testifies at 2:45 PM GMT
- FOMC Member Posic Testimony at 5:00 PM GMT
More major economies are due to release consumer spending data today, the UK and Canada, which could provide further clues as to whether central banks in these countries need to adjust monetary policy soon.
However, be prepared for possible intraday volatility between GBP and CAD before the end of the week, as well as potential profit-taking on recent market moves.