Daily Broad Market Recap – August 21, 2024

Just when the US dollar seemed to be in recovery mode, it posted another day in the red thanks to two major catalysts.

How did the rest of the markets perform?

Here are the top economic headlines and updates you need to know:

Headlines:

• Japan’s trade deficit in July The deficit narrowed to JPY 0.76 trillion from JPY 0.82 trillion, versus an expected JPY 0.72 trillion, as exports rose 10.3% year-on-year while imports rose 16.6%.
• Australia’s leading MI index posted another flat reading in July
• New Zealand credit card spending in July: -3.8% y/y (-3.1% previously)
• UK public sector net borrowing in July: £2.2bn (estimate £0.5bn, previous reading revised from £13.6bn to £12.6bn)
• Canada’s industrial producer price index in July remained flat on a monthly basis (-0.3% estimate, -0.1% prior), while the raw materials price index showed a 0.7% monthly rebound (-0.7% estimate, -1.7% prior).
• US Energy Information Administration Crude Oil Inventories: -4.6 million barrels (estimated -2.0 million, +1.4 million barrels previously)
• US NFP Annual Review For the year ending March 2024: -818K (expected -185K) with the professional and business services sector seeing a decline of 385K
• Minutes of the Federal Open Market Committee Meeting of July 30-31 He revealed that the “vast majority” of policymakers agreed that it was “likely appropriate” to cut interest rates in September.

Price movement in the broad market:

Major asset classes remained rangebound during Asian trading hours, as investors were likely awaiting the release of the Federal Open Market Committee meeting minutes. Volatility increased at the start of the London session, especially for gold and crude oil.

While the energy commodity managed to gain some ground from a larger-than-expected drawdown in crude oil inventories reported by the U.S. Energy Information Administration, it eventually resumed its decline after the U.S. Bureau of Labor Statistics published its annual revisions to nonfarm payrolls for the year ending March 2024.

As it turns out, employment gains during the period were cut by 818,000 jobs, which translates to 174,000 jobs per month compared to the previously reported average of 246,000. Rumors of these revisions were already circulating minutes before the actual numbers were printed, leading to volatile price movements for stock indexes and Treasury yields as well.

The minutes of the July Federal Open Market Committee meeting gave crude oil and U.S. bond yields a breather from their declines, as the document revealed that most Fed policymakers are leaning toward cutting interest rates in September.

Forex Market Behavior: US Dollar vs Major Currencies:

Comparison between the US dollar and major currencies Chart by TradingView

The US dollar started today in recovery mode, especially against the Japanese yen, where it fell and then rose against the franc and the New Zealand dollar while gradually rising against most of its counterparts, except for the Canadian dollar.

The USD/CAD pair fell on higher crude oil prices, followed by stronger-than-expected core inflation data from Canada and a larger-than-expected drawdown in U.S. stockpiles.

The USD/JPY pair also paused its advance after testing the 146.00 level and then extended its decline after the release of the annual US non-farm payrolls revisions. The dollar found itself in a weaker position against its peers as well after witnessing the largest annual job cuts since 2009.

While the FOMC minutes caused additional losses for the US currency amid further confirmation of a possible interest rate cut in September, the US dollar managed to rally before the end of the New York session, closing with only marginal losses against the yen, the Australian dollar and the New Zealand dollar.

Potential catalysts coming up on the economic calendar:

• Japan Manufacturing PMI at 12:30 AM GMT
• French Manufacturing and Services PMI 7:15 AM GMT
• German Manufacturing and Services PMI 7:30 AM GMT

• Eurozone Manufacturing and Services PMI at 8:00 am GMT

• UK Manufacturing and Services PMI 8:30 AM GMT
• UK Manufacturing Orders Forecast from the Confederation of British Industry at 10:00 GMT
• ECB Monetary Policy Meeting Report at 11:30 AM GMT
• US Manufacturing and Services PMI 1:45 PM GMT
• US Consumer Confidence Index at 2:00 PM GMT
• New Zealand Retail Sales at 10:45pm GMT
• Japan National Core CPI at 11:30 PM GMT
• Jackson Hole Symposium Kicks Off

It’s PMI Day, ladies and gentlemen!

Market focus may shift back to global growth concerns, as major economies are set to print their bonds. Manufacturing and Services PMI Survey Results Throughout the day. Watch for potential swings in overall risk sentiment, as these numbers could ease or worsen recession fears!