The US dollar has been steadily rising against most of its rivals in the foreign exchange market, but the Japanese yen has been a notable exception.
Price action across other asset classes was hotter, with volatility rising but market correlations appearing to have broken down.
What’s up with that?!
Here are the market headlines you need to know:
headlines:
- Richmond Manufacturing Index, United States In July: -17 (expected -7, previous -10)
- The US Securities and Exchange Commission has approved six exchange-traded funds. Trading is scheduled to begin on Tuesday.
- Eurozone Consumer Confidence Index in July: -13 (-13 expected, -14 previously)
- US Existing Home Sales June: 3.89 million (3.99 million expected, 4.11 million previously)
- Australian Manufacturing PMI July: 47.4 (previously 47.2)
- Australia Services PMI July: 50.8 (previously 51.2)
- Senior official in Japan’s ruling party Bank of Japan urged to start normalizing monetary policy
- Tesla shares fell 7.8% after the market after it missed earnings estimates.
Price movement in the broad market:
Dollar Index, Gold, S&P 500, Oil, 10-Year US Treasury Yield, Bitcoin Chart by TradingView
There didn’t appear to be a major risk driver at play on Tuesday, with higher-yielding assets and safe havens all over the place.
Bitcoin fell throughout the day as traders likely prepared to move funds into Ether ETFs that have been approved by the SEC for trading. Crude oil had a somewhat positive start but eventually fell sharply due to renewed ceasefire talks between Israel and Hamas, as well as concerns about demand driven by China.
Gold prices stumbled midday but eventually managed to close well, while US stocks fell when Tesla earnings missed expectations.
Forex Market Behavior: US Dollar vs Major Currencies:
US Dollar Overlay Against Major Currencies Chart by TradingView
The US dollar gained against its counterparts in the foreign exchange market throughout the day, despite mostly weaker-than-expected data from the Richmond manufacturing survey and the housing sector, even ignoring the decline in US bond yields.
But USD/JPY again broke away from the pack, as traders focused on calls for the Bank of Japan to provide a clearer timetable for monetary policy normalization. As it turns out, a senior ruling party official in Japan, Toshimitsu Motegi, stressed that the central bank’s ultra-low interest rates are putting further downward pressure on the yen even as inflation is beating its targets.
Potential catalysts coming up on the economic calendar:
- German GfK Consumer Climate Index at 6:00 am GMT
- French Manufacturing and Services PMI at 7:15 am GMT
- German Manufacturing and Services PMI at 7:30 am GMT
- Eurozone Manufacturing and Services PMI at 8:00 am GMT
- UK Manufacturing and Services PMI at 8:30am GMT
- Bank of Canada Monetary Policy Statement at 1:45 PM GMT
- US Manufacturing and Services PMI at 1:45 PM GMT
- Bahrain Olympic Committee Press Conference at 2:30 PM GMT
- US Energy Information Administration Crude Oil Inventories at 2:30 PM GMT
Today is PMI day for a few major economies, which means risk sentiment could be strongly driven by the overall outcome of these leading indicators for the current month.
Aside from that, the Bank of Canada’s monetary policy announcement is also likely to grab the spotlight, especially since many are expecting another rate cut.