Daily Broad Market Recap – August 27, 2024

No data? No problem!

With not much significant data scheduled to be released, traders turned to market themes yesterday and priced in their biases for the upcoming reports due later this week.

How did you trade your favorite assets anyway?

Headlines:

• Bank of Japan Core CPI Growth slowed from 2.1% y/y to 1.8% y/y (2.1% expected) in July
• German Consumer Climate GFK Worsened from -18.6 to -22.0 (expected -18.3) in August; Income and economic outlook showed notable losses and buying interest also declined
• Germany’s final GDP For Q2 2024 it was confirmed at 0.1% as expected.
• Sales achieved by CBI in the UK Decreased for third straight month in August: -27 (-11 expected, -43 previously)
• Standard & Poor’s US Home Price Index Up 6.5% YoY in June (6.2% expected, 6.9% prior)
• US Home Price Index FHFA Down 0.1% m/m (0.1% expected, 0.0% prior); Prices fell 5.7% between Q2 2023 and Q2 2024
• Richmond Manufacturing Index Down from -17 to -19 (expected -14) in August; Prices down; Employment component down from -5 to -15
• US Consumer Confidence Index Improved from 101.9 to 103.3 (100.9 expected) in August

Price movement in the broad market:

Major assets started the day in tight ranges, probably due to the lack of data on the calendar. Gold was the exception, extending the decline from the previous US session.

Volatility rose during the European session. US 10-year Treasury yields found support at the previous day’s highs as traders braced for a flood of new Treasury issuance that could pressure bond prices and push yields higher. Meanwhile, West Texas Intermediate crude oil prices fell, likely due to a de-escalation of conflicts in the Middle East and easing concerns over supply disruptions in Libya.

In the United States, focus shifted to US economic concerns after a housing index came in below estimates and a separate report showed Americans were becoming more concerned about the job market.

Some market players are now talking about a 50bps rate cut by the Fed, which could be the reason why spot gold erased all its losses and closed at $2,525. US stock indices traded mixed, the 10-year US Treasury yield fell from 3.87% to 3.82%, and WTI crude fell back below $76.00.

Forex Market Behavior: US Dollar vs Major Currencies:

US Dollar Overlay Against Major Currencies Chart by TradingView

Risk-on investors started the Asian session strongly, pushing currencies such as the Australian dollar, the New Zealand dollar and the British pound higher, while pushing safe havens such as the US dollar and the Japanese yen lower despite the absence of official data.

Sterling, in particular, has found additional support from Bank of England Governor Andrew Bailey, who took a relatively less dovish stance in his Jackson Hole speech last week. The divergence between the Fed’s dovish bias and the BoE’s non-dovish bias has helped push sterling to a two-year high against the US dollar!

The US dollar extended its downtrend during the European session, perhaps as more traders became concerned about a possible recession in the US. The declines then gained momentum in the US session as lower US reports supported recession fears and speculation of a 50bp rate cut by the Federal Reserve.

The US dollar ended the day lower across the board and US Dollar Index Hits Lows in 2024Oh my! Among the major currencies, the US dollar suffered the biggest losses against the New Zealand dollar and the Swiss franc, and the least against the euro and the Australian dollar.

Potential catalysts coming up on the economic calendar:

• FOMC Member Christopher Waller is scheduled to speak at 5:15 a.m. GMT.
• UBS Swiss Bank Economic Forecast at 8:00 AM GMT
• Bank of England Monetary Policy Committee Member Mann to speak at 12:15pm GMT
• US Crude Oil Inventories at 2:30 PM GMT
• ANZ Business Confidence Index in New Zealand at 1:00 am GMT (Aug 29)

With little data to move the market, traders may take cues from geopolitical headlines, central bank speculation, and overall risk sentiment.

End of month flows and concentrations ahead of this week’s economic reports could also impact your favorite assets, so make sure you’re glued to the TV so you don’t miss any market-moving headlines!