Daily Broad Market Recap – October 10, 2024

All eyes and ears were on the release of the US CPI… which didn’t cause much hype in the markets.

However, crude oil gained a massive 3% for the day. Read on to find out why!

Titles:

• Japan’s producer prices rose from 2.6% to 2.8% year-on-year in September instead of falling to the expected 2.3% figure.
• Kanda, Japan’s chief currency diplomat, noted that markets remain “very sensitive” to economic developments and monetary policy expectations in major economies.
• The People’s Bank of China spoke of further stimulusIt also said it would set up a 500 billion yuan Securities, Funds and Insurers Swap Facility (SFISF) to help companies pledge assets in exchange for liquidity.
• BOJ Deputy Governor Ryozo Himeno says the BOJ is not on a predetermined path, and would prefer to raise interest rates if the board had “more confidence” that its forecasts would come true.
• Australia’s MI inflation expectations for the next 12 months from September slowed from 4.4% to 4.0%
• German retail sales rose 1.6% month-on-month in August, after a 1.5% increase earlier.
• Israeli Defense Minister Galant It said its response to the Iranian missile attack “will be lethal, precise and above all surprising,” while Iran said it was prepared to fire thousands of missiles at Israel if necessary.
• Accounts of the European Central Bank’s monetary policy meeting He hinted at another 0.25% cut in October, with ECB member Schnabel reiterating “We cannot ignore the headwinds to growth. With signs of declining demand for labor and further progress in combating inflation…
• SNB Vice President Antoine Martin points to low inflation and promising economic growth as reasons to favor lower interest rates
• British Finance Minister Rachel Reeves It is considering increasing capital gains tax to up to 39%, as reported by The Guardian
• Hurricane Milton More than 3.4 million homes and businesses were without power in the United States, while nearly a quarter of gas stations across the state ran out of gasoline.
• US Consumer Price Index report for September It showed a 0.2% monthly rise in headline inflation (0.1% expected, 0.2% previous) and a 0.3% monthly increase in core inflation (0.2% expected, 0.3% previous), bringing the headline CPI down from 2.5% to 2.4%. On an annual basis (2.3% forecast)
• Initial unemployment claims in the United States At 258K (expect 231K, previously 225K) for the week ending October 3
• Chicago Federal Reserve Bank President Austin Goolsbee He noted that the “vast majority” of Fed policymakers expect that interest rates “will gradually decline by a fair amount to something much lower than where they are today.”
• Atlanta Federal Reserve Bank President Rafael Bostic He said he was “definitely open” to skipping an interest rate cut in November

Broad market price movement:

Markets were moving cautiously for most of the trading sessions in Asia and London, as traders prepared for Uncle Sam’s inflation report later in the day.

Only crude oil made notable gains, as investors kept a close eye on the geopolitical conflict in the Middle East. As it turned out, Israel warned of “deadly, precise and above all sudden” retaliation against Iran and ordered the evacuation of Lebanon, keeping traders on guard about major disruptions to oil production in the region.

To make matters worse, Hurricane Milton in the United States led to widespread power outages and left a quarter of Florida’s gas stations out of gasoline, raising concerns about supplies.

Meanwhile, US Treasury yields started to rise ahead of the US CPI report, which was then followed by a decline as traders also caught on to the weaker-than-expected initial jobless claims number.

US stocks also turned slightly lower as the chances of a 0.50% Fed rate cut became lower after inflation data surprised to the upside.

Forex market behavior: US dollar against major currencies:

Overlay of the US dollar against major currencies Chart by TradingView

The US dollar had a mostly quiet start against its counterparts, with the exception of the New Zealand dollar and the Australian dollar which rose in the latter part of the Asian trading session thanks to talks about further stimulus from China.

Volatility rose during market hours in London, with the US dollar acting as a counter currency to euro weakness following relatively dovish European Central Bank meeting minutes and a sell-off in the Canadian dollar. The British pound began to find itself on shaky ground as traders appeared to take into account the political uncertainty in the UK and the rising odds of another Bank of England cut.

USD/JPY and USD/CHF were already in a weaker state leading up to the US CPI and Initial Jobless Claims release, which then extended the declines in these pairs before sideways price action followed. Mixed statements from Fed officials also appear to have contributed to net dollar weakness towards the end of the New York session.

Potential catalysts coming on the economic calendar:

• UK GDP 6:00 AM GMT
• UK Goods Trade Balance and Industrial Production at 6:00 AM GMT
• Canada Employment Report 12:30 pm GMT
• US producer price index report 12:30 pm GMT
• FOMC Member Goolsbee’s speech at 1:45 PM GMT
• UoM revised its Consumer Confidence Index at 2:00 PM GMT
• FOMC Member Logan’s speech at 2:45 PM GMT
• FOMC Member Bowman’s speech at 5:10 PM GMT

The US will continue to attract market attention, this time with September inflation data and further speeches by FOMC members. Don’t sleep on weekly unemployment claims and scheduled speeches from FOMC members, as they could also impact expectations for the next Fed rate cuts.

Keep your eyes glued to the tube especially if you are trading USD in the following trading sessions!

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