The major assets were all over the charts on Wednesday. US Treasury yields continued to rise, pushing the US dollar higher and dragging gold prices lower.
Risk assets such as stocks and Bitcoin weakened, while crude oil prices failed to make new weekly highs.
What were the catalysts that moved major assets yesterday? Let’s discuss:
Titles:
- Bank of Canada cuts interest rates by 50 basis points, now aims to commit to controlling inflation
- President of the European Central Bank Lagarde She said she was “satisfied” with the progress inflation has made, but warned they needed to be “cautious” and look to the data to make future decisions.
- Consumer confidence in the euro area For October: -13 (-12 expected, -13 previous)
- Existing home sales in the United States For September: 3.84 million (3.88 million expected and previous)
- Environmental Impact Assessment: US crude oil stocks It rose by 5.5 million barrels in the week ending October 18 versus expectations for an increase of 0.9 million barrels and a withdrawal of 2.2 million barrels last week.
- Reserve Bank of New Zealand Governor Orr He hinted at a more measured pace of easing, saying it could be more “gradual” amid “calmer waters.”
- Bank of England Governor Bailey He said the decline in inflation was happening faster than officials expected but reiterated his concerns about rising services inflation
- Federal Reserve Beige Book Report Showed flat or slightly declining growth in September
Broad market price movement:
Dollar Index, Gold, S&P 500, Oil, 10-Year US Yields, Bitcoin Overlay Chart by TradingView
With no new catalysts during the Asian session, major assets remained range bound early. Volatility rose during the European session, as rising bond yields and persistent geopolitical risks kept traders cautious and limited risk-taking.
Crude oil prices started to decline from the $71.50 level, while Bitcoin, after failing to surpass the $67,750 level, began to fall towards the lows of $65,250.
In the US, a combination of election uncertainty, bearish corporate news from McDonald’s (MCD), Coca-Cola (KO), and Apple (AAPL), along with fears of higher inflation and interest rates if Trump wins, led to further gains. Capture stocks and push 10-year US bond yields higher.
The US10Y pair reached a three-month high near 4.26%, the US dollar continued its weekly rise, and safe-haven gold fell from highs of $2,760 to $2,712 before settling at $2,715.
Forex market behavior: US dollar against major currencies:
Overlay of the US dollar against major currencies Chart by TradingView
The US dollar continued its winning streak, benefiting from risk aversion and rising US Treasury yields, adding to the dollar’s weekly gains.
USD/JPY trading started early, with lack of intervention from Japanese officials and concerns about the possibility of Japan’s coalition government losing its majority in Sunday’s elections, pushing the yen (and other yen pairs) higher.
Later, a number of European Central Bank officials confirmed that inflation was on the right track, and supported a more cautious pace of policy easing. The Bank of Canada (BOC) also cut interest rates by 50 basis points, celebrating progress made against high inflation and suggesting that future moves will aim to “stick the ground” on inflation.
Bank of England (BOE) Governor Bailey and Reserve Bank of New Zealand (RBNZ) Governor Orr echoed similar sentiments, supporting further easing as inflation approaches their targets.
The US dollar continued its gains against “risk” currencies such as the Australian dollar, New Zealand dollar and British pound during the early US session but began to lose ground against other currencies. The dollar saw further broad-based weakness after the Federal Reserve’s Beige Book report signaled the need for more flexible monetary policies.
Potential catalysts coming on the economic calendar:
- France will release its manufacturing and services PMI at 7:15 AM GMT
- Germany will release its manufacturing and services PMI at 7:30 AM GMT
- Eurozone manufacturing and services PMIs will be released at 8:00 AM GMT
- UK Manufacturing and Services PMI results will be released at 8:30 AM GMT
- BoE Industrial Demand Forecast for the UK at 10:00 AM GMT
- Initial US unemployment claims at 12:30 PM GMT
- Hammack, a member of the Federal Open Market Committee, will speak at 12:45 PM GMT
- Bank of England member Mann will deliver a speech at 1:00 pm GMT
- The US Manufacturing and Services PMI is released at 1:45 PM GMT
- US New Home Sales at 2:00 PM GMT
- Bank of England Governor Bailey will deliver a speech at 7:45pm GMT
- UK GfK Consumer Confidence Index at 11:01 PM GMT
- Core CPI in Tokyo, Japan at 11:30 PM GMT
Markets will be watching flash PMIs from France, Germany, the Eurozone and the UK, which will provide key insights into the health of the region’s manufacturing and services sectors.
In the US, initial jobless claims and flash PMIs will guide expectations on economic resilience, while speeches by central bankers such as FOMC member Hammack and Bank of England Governor Bailey could inspire a repricing of central bank expectations later in the day.
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