Major assets were all over the place until the US released generally weak data from the American middle class.
Alternatives to the US dollar such as spot gold, crude oil and Bitcoin posted gains after the reports, although the US dollar managed to recover its losses against its foreign currency counterparts.
What are the market topics that dominated yesterday’s trading? We have deets!
headlines:
- Australia’s inflation expectations rose from 4.1% to 4.4% year-on-year in May
- ANZ New Zealand business confidence index in June: 6.1 (previously 11.2)
- Thursday, Japanese officials have spoken out against rapid moves in the yen.Finance Minister Shunichi Suzuki said they would “take necessary measures” while Chief Cabinet Secretary Yoshimasa Hayashi warned they would take “appropriate” measures against excessive currency movements.
- British banks borrowed £21.35bn in cash via the Bank of England’s short-term repo programme. It was the 11th time in the last 14 repo operations that use has reached record levels, raising concerns about cash levels in the financial system.
- The Bank of England’s twice-yearly Financial Stability Report He warned of “material” global economic risks and adjustments to the high interest rate environment that make assets “vulnerable to a sharp correction.”
- Reserve Bank of Australia Deputy Governor Andrew Hauser He said it was a “big mistake” to set policy through the CPI alone, and cited upcoming reports on employment, retail sales and business surveys as potential data points.
- US final GDP For the first quarter of 2024: 1.4% on a quarterly basis as expected compared to 1.3% previously.
- Final US GDP price index for Q1 2024: 3.1% q/q (3.0% forecast, 3.0% previously)
- US Initial Jobless Claims for the week ending June 22: 233K (FY 236K, previous 239K)
- US Durable Goods Orders Headlines Slight rise of 0.1% m/m in May (expect -0.5%, previously 0.6%); Core Durable Goods down 0.1% (0.2% expected, 0.4% previously)
- Pending home sales in the US unexpectedly fell in May: -2.1% m/m (0.6% expected, -7.7% previously)
- Tokyo Core CPI June: 2.1% y/y (2.0% forecast, 1.9% previous)
Broad market price movement:
Dollar Index, Gold, S&P 500, Oil, 10-Year US Yields, Bitcoin Overlay Chart by TradingView
Major financial assets continued or reversed their movements from the previous US session, while traders in the Asian session braced for US data releases on Thursday.
Bitcoin (BTC/USD) fell below $61,000, spot gold fell below $2,300, and US crude oil prices fell below $80.50.
Things started to turn during the European session as traders likely prepared for the upcoming mid-level US data releases.
When US reports showed some weakness, 10-year Treasury yields fell from 4.34% to 4.28%, giving a boost to US dollar alternatives such as spot gold, Bitcoin and crude oil prices. Oil even got some extra support from rising tensions between Israel and Hezbollah, the Iranian-backed group in Lebanon.
Forex Market Behavior: US Dollar vs Major Currencies
Comparison between the US dollar and major currencies Chart by TradingView
With not much top-tier data to take into account, Asian session traders focused on USD/JPY holding above 160.00 and the potential impact if it reaches 161.00. The US dollar, perhaps driven by the USD/JPY pair, faced downward pressure during the US session and ahead of several mid-level data releases.
In the US session, we saw that the final GDP reading was slightly higher than the second estimate, but core durable goods orders and continuing jobless claims pointed to some economic weakness.
The dollar fell sharply after these reports but managed to recover most of its losses during the day after about two hours. One possible reason could be that traders adjusted their positions earlier than expected. US Core PCE Report Delivery time is later today.
By the end of the day, the US dollar remained unchanged against most major currencies, with the exception of the euro and the British pound, which rose by about 0.21% and 0.12%, respectively.
Potential catalysts coming on the economic calendar:
- UK Final GDP at 6:00am GMT
- UK Current Account Balance at 6:00am GMT
- Preliminary CPI in France at 6:45 am GMT
- Swiss KOF Economic Barometer at 7:00 am GMT
- CPI in Spain at 7:00 AM GMT
- Germany’s unemployment rate changes at 7:55 am GMT
- Italy Preliminary CPI at 9:00 AM GMT
- Canada’s monthly GDP at 12:30 PM GMT
- US Core PCE Price Index at 12:30 PM GMT
- US Personal Income and Spending at 12:30 PM GMT
- PMI in Chicago, US at 1:45 pm GMT
- The U.S. revised up consumer confidence and inflation expectations from the University of Michigan at 2:00 p.m. GMT.
Markets are expected to witness another busy day as the UK prints its final GDP reading for the first quarter of 2024.
Later, the closely watched US core PCE price index – the Fed’s preferred inflation gauge – will be released. If that doesn’t cause additional volatility for the USD, middle-class data releases like personal income, spending and the final consumer inflation expectations from the University of Mozambique are likely to do so!
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