Daily Broad Market Recap – September 24, 2024

Central bankers were in the spotlight yesterday, and the lack of high-profile data releases facilitated a repricing of monetary policy biases across major assets.

What headlines influenced the price movement of major assets?

We have the details!

Headlines:

• China announces a series of stimulus measures Which includes reducing the reserve ratio requirement by 50 basis points and the 7-day reverse repo rate from 1.7% to 1.5%.
• As expected, the Reserve Bank of Australia kept interest rates at 4.35% and reiterated that inflation “remains too high”.
• Members of major central banks expressed their views:
  • European Central Bank President Lagarde She said high inflation was “not completely overcome,” and said she was talking but not coordinating with Powell.
  • Bank of Japan Governor Ueda He believes inflation is “likely” to reach 2%, and has reiterated his willingness to raise interest rates if their economic forecasts materialize.
  • Reserve Bank of Australia Governor Bullock She noted that the team did not discuss raising interest rates or the size of any potential rate cuts. She added that “interest rates will remain steady for the time being.”
  • Board of Education Governor Billy “Inflation has come a long way,” he said, and easing would continue “gradually.”
  • Madis Muller, President of the European Central Bank He does not rule out a rate cut in October, but said it would be “easier” to make the decision as more data comes in in December.
  • Michelle Bowman, Voting Member of the Federal Open Market Committee – The lone opponent of a 50 basis point rate cut – Believes the Fed should have moved at a “more moderate” pace
  • German Central Bank President Joachim Nagel He believes that some of the factors dragging down the German economy are temporary, and that it will regain momentum again even though it is expected to remain weak this year.
  • Governor of the Bank of Canada Macklem He reiterated that it was “reasonable” to expect further rate cuts, and noted that he was closely monitoring consumer spending, business hiring and investment.
• Germany – Ifo Business Climate Index The consumer price index reading deteriorated from 86.6 to 85.4 (expected 86.1) in September as pressures on the economy increased.
• S&P CoreLogic Case-Shiller US Home Price Index Decreased from 6.5% y/y to 5.9% y/y as expected in July
• US Home Price Index FHFA For July: 0.1% m/m (expected 0.2%, June reading revised up from -0.1% to 0.0%)
• US Consumer Confidence Index Decreased from 105.6 to 98.7 (103.9 expected) in September
• API: US Crude Oil Inventories Decreased by 4.339 million barrels (1.1 million barrels expected, 1.96 million barrels previously increased) in the week ending September 20.
• Japan Service Producer Price Index For August: 2.7% y/y (2.6% expected, July revised down from 2.8% to 2.7%)

Price movement in the broad market:

Risk assets and their major U.S. dollar counterparts got a boost in early Asian trading after Chinese officials laid out plans to stimulate the economy. The measures include cutting the People’s Bank of China’s interest rates and reserve requirement ratio, lowering mortgage rates and allowing companies to use PBOC financing to buy shares.

China’s stimulus, coupled with the Fed’s recent 50bps rate cut, has sparked risk appetite across markets. Traders took advantage of the optimism even in the European and US sessions, as weaker-than-expected business climate data from Germany’s Ifo Institute and a weak consumer confidence report from the US central bank dampened risk appetite.

Despite these weak reports, gold still hit new highs, closing at $2,660. Bitcoin (BTC/USD) retested its September high of $64,700, while both the S&P 500 and Dow Jones closed at new highs.

Meanwhile, crude oil found additional support from rising tensions between Israel and Iran-backed Hezbollah in southern Lebanon, hitting fresh weekly highs around $72.25 before settling near $71.50.

Forex Market Behavior: US Dollar vs Major Currencies:

US Dollar Overlay Against Major Currencies Chart by TradingView

The US dollar extended losses as traders continued to price in the US Federal Reserve’s easing cycle, while central bankers in other major economies led individual currency moves.

Risk sentiment and the US dollar selling gained momentum after China announced easing measures, including a cut in interest rates by the People’s Bank of China and mortgage rates, and potential financing by the People’s Bank of China for companies to buy shares.

The yen fell after Bank of Japan Governor Ueda hinted that an interest rate hike was not imminent. Meanwhile, the Australian dollar faced a sharp decline due to “buying rumors and selling news,” briefly falling despite the Reserve Bank of Australia’s “tight stance.”

Elsewhere, ECB Governor Muller signaled the possibility of a rate cut, preferring December to October. Bank of England Governor Bailey signaled a gradual rate cut, while Bank of Canada Governor Macklem hinted at further cuts.

The US dollar took another hit after a weak US consumer confidence report from the central bank, closing weak across the board, with its biggest losses against commodity currencies and smaller losses against the yen.

Potential catalysts coming up on the economic calendar:

• UBS Economic Forecast at 8:00 AM GMT
• Board of Education Member Megan Green will speak at 8:00 a.m. GMT.
• US New Home Sales at 2:00 PM GMT
• US Energy Information Administration Crude Oil Inventories at 2:30 PM GMT
• FOMC Voting Member Adriana Kogler to Speak at 8:00 PM GMT
• Bank of Japan Meeting Minutes 11:50 PM GMT
• RBA Financial Stability Review at 1:30am GMT (September 26)

Central banks will remain in the spotlight as there is not much high-level data expected to be released.

Bank of England Governor Green could shake up the pound in London, while FOMC voting member Adriana Kogler could defend her vote for a 50bp rate cut in the US.

Mid-level releases like US new home sales and US Energy Information Administration crude oil inventories can also impact overall risk sentiment, so be sure to keep your eyes glued to the pipe if you have open trades this week!

Don’t forget to check out our new Forex Correlation Calculator!