Markets got an extra dose of risk appetite thanks to another batch of stimulus measures from China.
Meanwhile, the Swiss National Bank (SNB) announced its third consecutive interest rate cut and hinted at more to come.
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Titles:
Broad market price movement:
Dollar Index, Gold, S&P 500, Oil, 10-Year US Yields, Bitcoin Overlay Chart by TradingView
After yesterday’s market skepticism about China’s follow-up with stimulus plans, the Politburo came out with an announcement of concrete plans to provide financial support and enable the economy to reach the government’s growth targets.
This increased risk appetite during the Asian trading session, putting stock futures on a steady rise and lifting high-yielding assets like gold and Bitcoin as well. The BTC/USD pair went on to test the $65,000 mark later in the day while the S&P 500 and Dow Jones rose to new highs.
However, crude oil was barely able to participate in these gains, as the energy commodity fell on news that Saudi Arabia had abandoned its $100 per barrel price target and would instead join the rest of its OPEC+ allies in boosting production in December. . After a slight decline during the London session, crude oil resumed its decline, closing down more than 3% on the day.
Forex market behavior: US dollar against major currencies:
Overlay of the US dollar against major currencies Chart by TradingView
Forex traders were in a risk-on mood early in the day, thanks to the Chinese Politburo’s announcement of fiscal support measures and a 0.50% cut in the central bank’s reserve ratio requirement. The safe-haven dollar fell as markets digested the potential impact of these aggressive stimulus efforts on the global economy, while the Australian and New Zealand dollars took the lead.
The USD/JPY pair managed to maintain its strength, despite bouncing back into the green zone after a slight decline during the London session. The US dollar received some support from relatively upbeat mid-term economic data, as there were no revisions to the 3.0% growth number for Q2 2024, and the initial jobless claims number appeared better than expected.
The dollar also continued to rise against most of its peers when Fed Chairman Powell made some opening remarks during the Treasury market conference, but eventually regained ground as risk appetite favored higher-yielding currencies. Consolidation is back in play for most dollar pairs before the end of the US session.
Potential catalysts coming on the economic calendar:
- Spanish CPI at 7:00 AM GMT
- German unemployment changes at 7:55 AM GMT
- Canadian monthly GDP 12:30 pm GMT
- US core personal consumption expenditures price index 12:30 pm GMT
- US personal income and spending data at 12:30pm GMT
- Revised US Consumer Confidence Index from the University of Michigan at 2:00 PM GMT
Data flow may be lighter than usual today, leaving traders plenty of room to prepare for the release of the US core PCE price index, also known as the Fed’s preferred measure of inflation. Expectations call for another 0.2% monthly rise in price levels, although any major surprises could shake dollar trends.
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