Daily Broad Market Recap – July 16, 2024

Major assets posted mixed results as markets priced in a strong US economy and increased chances of a Federal Reserve rate cut.

Spot gold, bitcoin and US stocks rose, while US bond yields and the US dollar fell.

We have the headlines you need to know about yesterday’s price action!

headlines:

• Eurozone trade surplus in May: €12.3 billion (forecast €18.0 billion, previous €18.5 billion)
• The ZEW index of economic sentiment in the euro zone fell from a three-year high of 51.3 to 43.7 (48.1 expected) in July.
• German ZEW economic confidence fell from 47.5 to 41.8 (41.2 expected) in July, its first decline since July 2023
• Canada CPI June 2024: 2.7% y/y (2.9% y/y forecast; 2.9% y/y in May); largely due to a significant slowdown in gasoline price inflation from 5.6% y/y to 0.4% y/y
• On a monthly basis, Canada’s CPI slowed to 0.1% m/m from 0.6% m/m in the previous month.
• US retail sales fall but still up 2.3% from a year ago
• National Homeowners Association U.S. Housing Market Index July: 42 (43 forecast, prior); Homebuyers, builders, developers expect interest rates to fall
• New Zealand inflation slowed in Q2 but caused a bullish reaction in the New Zealand dollar
• Federal Open Market Committee voting member Adriana Kugler said she is “cautiously optimistic” about easing prices for goods, services and housing, and believes it “would be appropriate” to ease policy this year.
• Melbourne Institute Leading Index held steady in June

Price movement in the broad market:

With no major catalysts from the Asian and European sessions, major assets traded with mixed results as traders continued to price in their biases on a Fed rate cut.

The yield on the 10-year US Treasury note continued its decline from the previous week to hit a 17-week low of 4.17%. This likely contributed to the slow but steady decline in the US dollar after the US missed its retail sales data for June.

Spot gold prices extended their July bullish trend and hit a new record high of $2,470. Bitcoin (BTC/USD) dropped to $62,500 during the Asian session but eventually recovered above $65,000. Talks about an ETF (ETH/USD) escalated.

Meanwhile, crude oil prices shrugged off a drop in US oil inventories reported by the US Energy Information Administration, as traders continued to price in disappointing Chinese GDP and what that could mean for global demand.

Finally, positive earnings reports in the US helped push the S&P 500 and Dow Jones to new record highs, with the Dow in particular recording its best performance since June 2023.

Forex Market Behavior: US Dollar vs Major Currencies:

Comparison between the US dollar and major currencies Chart by TradingView

During the Asian session, commodity-linked currencies such as the Australian and New Zealand dollars continued their weekly losses against the US dollar. There were no direct catalysts, but traders may have continued to assess the disappointing reports from China and New Zealand.

Rumors of Japanese currency intervention also pushed the USD/JPY pair higher during the Asian session.

The dollar gave up some of its gains during the European session before rising sharply after the release of the US retail sales report. While reports pointed to weaker retail spending in June, data for previous months was revised higher and traders focused on the overall strength in the US economy.

However, the US dollar gave up its gains and headed slowly lower. The increased risk appetite may have pushed safe havens lower, but the decline in US bond yields may have also had an impact on the US dollar ending the day at intraday highs against the Australian dollar, New Zealand dollar and Japanese yen, and in the red against the euro, British pound and Canadian dollar.

Potential catalysts coming up on the economic calendar:

• UK Inflation Update at 6:00am GMT
• UK PPI Input and Output Prices at 6:00am GMT
• UK House Price Index at 8:30am GMT
• Eurozone Final CPI Report at 9:00 AM GMT
• US Building Permits and Housing Starts at 12:30 PM GMT
• US Industrial Production at 1:15 PM GMT
• US Crude Oil Inventories at 2:30 PM GMT
• US Beige Book Report at 6:00 PM GMT
• Australia labour market data at 1:30am GMT

Inflation will be the name of the game during the European session with both the UK and the Eurozone printing inflation data for June.

Price action may slow down during the US session with “only” lower-level US reports coming out, but volatility may increase again when Australia releases its July jobs report.