The lack of fresh catalysts led to pullbacks and potential profit-taking among major assets on Wednesday.
What market themes have moved your favorite assets anyway?
Let’s discuss!
Headlines:
- Australia’s inflation broadly cooler but still elevated in August
- Bank of Japan Core CPI It remained at 1.8% year-on-year as expected in August.
- Swiss Bank UBS Economic Forecast It decreased from -3.4 to -8.8 in August.
- Board of Education Member Megan Green A “gradual” approach to rate cuts is favoured as service sector inflation remains elevated and growth risks point to a higher neutral rate in the longer term.
- China’s Leading Economic Indicator Decreased 0.2% m/m in August after flat growth in July; ‘Growth headwinds persist but have not worsened’
- US New Home Sales For August: 716K (expected 699K, previous 751K)
- Crude Oil Inventories from the US Energy Information Administration Decreased by 4.5 million barrels in the week ending September 20 (1.3 million barrels decline expected, 1.6 million barrels decline previously)
- FOMC Voting Member Adriana Kugler “Strongly supported” a 50 basis point rate cut in September, and favors further cuts as the Fed rebalances its focus from inflation to growth
- People’s Bank of China Reduce interest rates on the one-year medium-term lending facility from 2.3% to 2.0%
- Minutes of the Bank of Japan’s July Meeting It showed that at least two of the nine members saw room to raise interest rates further.
Price movement in the broad market:
Dollar Index, Gold, S&P 500, Oil, 10-Year US Treasury Yield, Bitcoin Chart by TradingView
The day started off fairly steady, with Asian traders still digesting China’s latest monetary policy moves.
Volatility has been elevated in the London session as markets question whether China’s monetary adjustments will have much impact without some serious fiscal stimulus. Furthermore, reports that Israel is preparing for a ground invasion of Lebanon are likely to dampen risk sentiment.
Meanwhile, investors, already concerned about weak U.S. consumer confidence data and disappointing European PMIs, appeared to use record-high asset prices as an opportunity to lock in profits before the end of the quarter.
US stocks ended the day mixed. The Nasdaq hit a two-month high, while the Dow Jones closed in the red. Bitcoin (BTC/USD) failed to break its monthly high, falling from $64,800 to $63,200. Gold settled just below yesterday’s close, and US crude oil prices fell from $71.50 to $69.75.
US 10-year Treasury yields found support from global growth concerns and a reversal from yesterday’s declines. Yields jumped from a daily low of 3.73% to close at 3.79%.
Forex Market Behavior: US Dollar vs Major Currencies:
US Dollar Overlay Against Major Currencies Chart by TradingView
A combination of concerns about global growth and profit-taking helped reverse some of the losses the U.S. dollar suffered earlier on Wednesday.
The US dollar posted modest gains during the Asian session after falling in the previous US session. However, demand for the dollar as a safe haven rebounded in the London session as traders grew concerned about the growth outlook in the US, Europe and China.
By the time the US session got underway, the dollar had found fresh upward momentum – likely as traders closed their short USD positions ahead of Thursday’s initial jobless claims report, FOMC speeches and Friday’s US core PCE price index data.
The dollar gave up some of its gains after FOMC member Kogler voiced support for further rate cuts. However, the greenback ended the day stronger against most of its major peers.
Potential catalysts coming up on the economic calendar:
- Germany – GfK Consumer Climate Index at 6:00 am GMT
- Swiss National Bank monetary policy decision at 7:30 am GMT, followed by press conference at 8:00 am GMT
- ECB Economic Bulletin at 8:00 am GMT
- US Final GDP and GDP Price Index at 12:30 PM GMT
- US Initial Jobless Claims at 12:30 PM GMT
- US Core Durable Goods Orders at 12:30 PM GMT
- Several FOMC members, including Collins, Kugler, Bowman, Williams, Barr, Cook and Chairman Powell, will deliver speeches beginning at 1:10 p.m. GMT.
- European Central Bank President Lagarde will speak at 1:30 p.m. GMT.
- US Pending Home Sales at 2:00 PM GMT
- US Treasury Secretary Janet Yellen will speak at 3:15 p.m. GMT.
- Tokyo Core CPI at 11:30 PM GMT
Central banks will remain in focus today, starting with the Swiss National Bank dropping its September policy decision during the European session.
Later, several FOMC members (including J.P. Bowe) are likely to defend their decision to cut interest rates by 50 basis points. European Central Bank President Lagarde will also deliver an opening speech, which could move the euro pairs.
Meanwhile, mid-level US economic data due later could support or contradict concerns about US growth and potentially impact risk in general.
Don’t forget to check out our new Forex Correlation Calculator!