Political developments in the US and China’s surprise move to ease monetary policy dominated headlines earlier this week.
How did asset classes react to this news?
Here are the market headlines you need to know:
headlines:
- US President Biden withdraws from presidential raceVice President Harris is endorsed as the Democratic nominee.
- New Zealand’s trade surplus New Zealand exports in June rose from NZ$54 million to NZ$699 million against estimates of NZ$294 million, with exports down 0.1% while imports fell 13%.
- The People’s Bank of China cut key short-term interest rates.The central bank also cut the one-year base rate from 3.45% to 3.35% and the five-year base rate from 3.95% to 3.85% instead of keeping the interest rate steady.
- ECB official Casimir He suggested that market expectations of two rate cuts by the end of the year were “not entirely out of place.”
- German Central Bank Monthly Report for July: German economic output is likely to grow somewhat more slowly in the second quarter of 2024, and is likely to strengthen “somewhat” in the third quarter of 2024.
Price movement in the broad market:
Dollar Index, Gold, S&P 500, Oil, 10-Year US Treasury Yield, Bitcoin Chart by TradingView
Monday was a generally favorable start to risk, with cryptocurrencies and commodities starting on a positive note. Market watchers were talking about the impact of Biden’s abandonment of his re-election bid and potential Democratic nominee Harris’ economic agenda, leading to gains for U.S. stock indices on a potentially positive note for big tech companies.
But crude’s gains were short-lived, as the energy commodity was dragged down by weaker growth prospects in China after its central bank announced surprise interest rate cuts. Gold also took a hit midday but eventually rebounded to end up slightly in the red.
Bitcoin fell as it reached a ceiling around the $68,000 area but soon found support at $67,000 and rebounded to intraday highs.
Forex Market Behavior: US Dollar vs Major Currencies:
US Dollar Overlay Against Major Currencies Chart by TradingView
In the forex market, the US dollar started mostly strong, except for a sharp drop in the USD/JPY pair from the 157.85 level during Asian market hours. There seemed to be no major catalysts behind the move, except for the usual set of jitters associated with intervention at the moment the yen pair rises to a key technical area.
Meanwhile, the Australian and New Zealand dollars fell as the People’s Bank of China announced it would ease monetary policy, a move widely seen as a sign that the Chinese economy faces weaker growth prospects. Both commodity currencies fell broadly for much of the day before consolidating during the U.S. session.
European currencies remained stuck in consolidation throughout while USD/CAD and USD/CHF ended slightly in the green, despite the absence of economic reports.
Potential catalysts coming up on the economic calendar:
- Eurozone Consumer Confidence Index at 2:00 am GMT
- US Existing Home Sales at 2:00 AM GMT
- US Richmond Manufacturing Index at 2:00 AM GMT
- Australian Manufacturing and Services PMI at 11:00pm GMT
It’s another relatively quiet day on the data front, leaving market participants with a chance to take directional clues from Political headlines And the general mood of the market.
Please note that Earnings Reports Big tech companies, especially Alphabet and Tesla, are lining up, so watch for strong reactions from US stock indices that could spill over to the rest of the financial markets.
