Market price action was mixed at the start of the week, with some traders standing on the sidelines ahead of this week’s data releases while others factored in rising tensions in the Middle East.
What assets are you watching closely that have seen increased volatility and price trends?
We’re breaking them down today:
Headlines:
- Reserve Bank of Australia Deputy Governor Andrew Hauser Support a more flexible approach to policy making, where decisions are based on scenarios other than rigid forecasts.
- Germany’s wholesale price index rose 0.3% month-on-month in July after a 0.3% decline in June (0.2% expected).
- Building Permits in Canada It fell another 13.7% month-on-month in June after a 12.7% decline in May.
- The Cleveland Fed’s inflation forecast has been lowered from 3.8% y/y to 3.4% y/y in the third quarter of 2024.
- US budget deficit Increased from $66.0 billion in June to $243.7 billion in July as expenditures (+16%) outpaced deferred tax revenues (+12%).
- Visitor numbers to New Zealand fell 0.2% month-on-month in June after a 4.0% increase in May.
- Producer price inflation in Japan Growth accelerated from 2.9% y/y to 3.0% y/y in July
Price movement in the broad market:
Dollar Index, Gold, S&P 500, Oil, 10-Year US Treasury Yield, Bitcoin Chart by TradingView
A bank holiday in Japan kept things fairly quiet during the Asian trading session, and with no major data and some caution ahead of this week’s key events, that quiet extended to European markets as well.
Oil prices saw further movement, rising from $76.75 to $80, largely driven by rising tensions in the Middle East. There is talk that Iran may be preparing to attack Israel, which may explain why the US is sending a guided-missile submarine and accelerating the deployment of the Abraham Lincoln carrier strike group to the region. However, gains were somewhat limited after OPEC cut its 2024 demand forecast due to a weak outlook for China.
In the US, gold prices also rose, from $2,425 to $2,470, while the yield on 10-year US Treasury bonds fell to below 3.9%. This decline may be due to growing expectations that US inflation reports this week may fuel talks of a rate cut by the Federal Reserve.
Forex Market Behavior: US Dollar vs Major Currencies:
US Dollar Overlay Against Major Currencies Chart by TradingView
The US dollar was mixed across the board, falling against “riskier” currencies while holding gains against other safe havens such as the Japanese yen and the Swiss franc. The weakness in the US dollar against riskier assets may be linked to a drop in US 10-year Treasury yields, along with some profit-taking ahead of key US data this week.
Commodity-linked currencies such as the Australian and New Zealand dollars started the week on a strong note, benefiting from a recovery from last week’s risk aversion and global growth concerns. Traders appeared to be positioning themselves ahead of the Reserve Bank of New Zealand’s monetary policy decision and a slew of UK economic data, which likely contributed to gains in the Kiwi and British pounds.
Potential catalysts coming up on the economic calendar:
- UK labour market data at 6:00am GMT
- Initial orders for manufacturing machinery in Japan at 6:00 AM GMT
- German ZEW Economic Sentiment at 9:00 am GMT
- NFIB US Small Cap Index at 10:00 AM GMT
- US PPI report at 12:30 PM GMT
- FOMC Member Posich to Speak at 5:15 PM GMT
- Reserve Bank of New Zealand Policy Decision at 2:00am GMT (August 14)
News traders are in for a busier day, starting with UK labour market figures that may or may not encourage speculation of a Bank of England rate cut.
Later today, the Reserve Bank of New Zealand (RBNZ) will be in the spotlight. While markets expect the central bank to keep interest rates at 5.50%, the RBNZ’s quarterly forecasts and press conference could encourage increased volatility in major NZD pairs.
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