With not much new catalyst to consider, markets are starting to position themselves ahead of expected data releases on Wednesday and Thursday.
What headlines moved the major assets anyway?
We discuss the most important market drivers on Tuesday:
Headlines:
- Westpac: Australian Consumer Sentiment The consumer price index fell 0.5% from 85.0 to 84.6 in September; the focus may shift from living costs to job prospects
- tusk: Business Confidence in Australia It fell from 1 to -4 in August, the first negative reading in three months.
- China’s trade surplus Exports of primary goods rose from $67.81 billion to $91.02 billion in August, with exports (+8.7% y/y) outpacing imports (0.5% y/y).
- Initial orders for manufacturing machinery in Japan It fell 3.5% year-on-year in August after an 8.4% year-on-year increase in July.
- Final inflation in Germany Confirmed at -0.1% in August
- UK jobs data mixedWith signs of a slowing labor market but wage pressures continuing
- NFIB US Small Business Index It fell from 93.7 to 91.2 in August; “Historically high inflation remains the main issue for owners.”
- Sarah Breeden Lieutenant Governor Board of Education Supports easing financial restrictions to boost economic growth
- Governor of the Bank of Canada Macklem He said global trade turmoil could make it harder for the central bank to meet its 2% inflation target.
- Federal Open Market Committee Member Michael Barr It announced a revised plan to impose a 9% increase in banks’ capital requirements, down from the 19% increase proposed last summer.
- Number of visitors to New Zealand It rose 2.2% month-on-month in July; June’s reading was revised up from -0.2% to 0.5%.
Price movement in the broad market:
Dollar Index, Gold, S&P 500, Oil, 10-Year US Treasury Yield, Bitcoin Chart by TradingView
With not a lot of big data to consider, traders kept major assets in wide ranges early in the day.
Things improved slightly in the European session, as risk aversion and profit taking increased ahead of the US CPI report and the European Central Bank meeting. European stocks fell, while safe havens such as gold saw a boost. Crude oil was particularly hurt by weak Chinese import data for August and OPEC’s downward revision of its global oil demand forecast for 2024 and 2025.
In the US trading session, it was all about expectations of a rate cut by the Federal Reserve. The rate cut speculation sent bond prices higher, sending the US 10-year Treasury yield to its lowest closing level in more than a year.
Bitcoin (BTC/USD) also rebounded from its lows, ending the day just below $58,000. Meanwhile, WTI crude oil recovered some of its losses, rising from $65.30 to $66.25. U.S. stocks had a mixed day. The S&P 500 and Nasdaq rose, while the Dow Jones fell, weighed down by concerns about the banking sector.
Forex Market Behavior: US Dollar vs Major Currencies:
US Dollar Overlay Against Major Currencies Chart by TradingView
The US dollar started the day on a strong note, continuing its rally from the previous US session. But Asian traders were not too keen on the rally, and the US dollar fell as the market began betting on a more dovish decision from the Federal Reserve later this month.
Price action became more volatile in the following sessions, as events such as the UK jobs report and Bank of Canada Governor Macklem’s press conference led to moves in their currencies.
Overall, we saw risk uncertainty, with “risk” currencies such as the euro, pound, Australian dollar, Canadian dollar and New Zealand dollar falling, while safe havens such as the Swiss franc and Japanese yen gained further momentum. This is likely due to the uncertainty ahead of the US CPI report and the European Central Bank decision on Thursday.
The USD/JPY pair extended its losses since the European session, becoming the weakest of the major USD pairs. While the dollar found some support against its counterparts at the start of the US session, it eventually fell from its highs during the day.
Potential catalysts coming up on the economic calendar:
- UK Monthly GDP at 6:00 AM GMT
- UK Goods Trade Balance at 6:00 am GMT
- UK Services Index 3-month at 6:00 am GMT
- UK Industrial Production at 6:00am GMT
- UK Manufacturing Production at 6:00am GMT
- US CPI report at 12:30 PM GMT
- UK Leading Index at 1:30pm GMT
- US Energy Information Administration Crude Oil Inventories at 2:30 PM GMT
- RICS UK House Price Index at 11:01pm GMT
- Japan BSI Manufacturing Index at 11:50 PM GMT
- Japan PPI report at 11:50 PM GMT
News traders gather! The UK will see a slew of mid-level economic reports that could move the pound during the London session.
In the US, August inflation reports are expected to mostly hold steady and keep Fed rate cut speculation at 25bp.
Think you can catch the dots from these releases? Keep your eyes glued to the tube!
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