The major assets were all over the place until the U.S. dropped generally weak mid-tier U.S. data releases.
USD alternatives like spot gold, crude oil, and bitcoin gained at the reports’ releases though the U.S. dollar managed to recoup its losses against its FX counterparts.
Which market themes dominated yesterday’s trading? We have the deets!
Headlines:
- Australia’s MI inflation expectations advance from 4.1% to 4.4% y/y in May
- New Zealand’s ANZ business confidence index in June: 6.1 (11.2 previous)
- On Thursday, Japanese officials talked against the yen’s rapid moves, with FinMin Shunichi Suzuki saying they “will take necessary actions” while Chief Cabinet Secretary Yoshimasa Hayashi warned that they will take “appropriate” action against excessive currency moves
- British banks borrowed 21.35B GBP worth of cash via the BOE’s short-term repo program. It marked the 11th time in the past 14 repos that the usage hit record highs and sparked concerns over the cash levels in the financial system
- BOE’s twice-a-year Financial Stability Report warns of “material” global economic risks and high interest rate environment adjustments that make assets “vulnerable to a sharp correction”
- RBA Deputy Governor Andrew Hauser said it’s a “bad mistake” to set policies from CPI alone, and cited upcoming reports on employment, retail sales, and business surveys as potential data points
- U.S. final GDP for Q1 2024: 1.4% q/q as expected vs. 1.3% previous
- U.S. final GDP price index for Q1 2024: 3.1% q/q (3.0% forecast, 3.0% previous)
- U.S. initial jobless claims for the week ending June 22: 233K (236K forecast, 239K previous)
- U.S. headline durable goods orders edge up 0.1% m/m in May (-0.5% forecast, 0.6% previous); Core durable goods slip by 0.1% (0.2% forecast, 0.4% previous)
- U.S. pending home sales unexpectedly fell in May: -2.1% m/m (0.6% forecast, -7.7% previous)
- Tokyo’s core CPI for June: 2.1% y/y (2.0% forecast, 1.9% previous)
Broad Market Price Action:
Dollar Index, Gold, S&P 500, Oil, U.S. 10-yr Yield, Bitcoin Overlay Chart by TradingView
Major financial assets either continued or reversed their moves from the previous U.S. session while traders in the Asian session geared up for Thursday’s U.S. data releases.
Bitcoin (BTC/USD) slipped below the $61,000 mark, spot gold dropped back under $2,300, and U.S. crude oil prices fell below $80.50.
The tides started turning during the European session as traders probably prepared for the upcoming U.S. mid-tier data releases.
When the U.S. reports showed some weaknesses, the 10-year Treasury yields dropped from 4.34% to 4.28%, which gave a boost to USD alternatives like spot gold, bitcoin, and crude oil prices. Oil even got some extra support from the growing tensions between Israel and Hezbollah, the Iran-backed group in Lebanon.
FX Market Behavior: U.S. Dollar vs. Majors
Overlay of USD vs. Major Currencies Chart by TradingView
With not much top-tier data to factor in, Asian session traders focused on USD/JPY holding steady above 160.00 and the potential impact if it hits 161.00. The U.S. dollar, likely driven by USD/JPY, faced bearish pressure during the U.S. session and ahead of several mid-tier data releases.
In the U.S. 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 weaknesses.
The dollar took a sharp dive following these reports but managed to recover most of its intraday losses about two hours later. One possible reason could be traders adjusting positions ahead of the anticipated U.S. core PCE price index report due later today.
By the end of the day, the USD was unchanged against most major currencies, except for the EUR and GBP, which gained around 0.21% and 0.12% respectively.
Upcoming Potential Catalysts on the Economic Calendar:
- U.K.’s final GDP at 6:00 am GMT
- U.K.’s current account balance at 6:00 am GMT
- France’s preliminary CPI at 6:45 am GMT
- Swiss KOF economic barometer at 7:00 am GMT
- Spain’s flash CPI at 7:00 am GMT
- Germany’s unemployment change at 7:55 am GMT
- Italy’s preliminary CPI at 9:00 am GMT
- Canada’s monthly GDP at 12:30 pm GMT
- U.S. core PCE price index at 12:30 pm GMT
- U.S. personal income and spending at 12:30 pm GMT
- U.S. Chicago PMI at 1:45 pm GMT
- U.S. revised UoM consumer sentiment and inflation expectations at 2:00 pm GMT
The markets are in for another busy day as the U.K. prints its final Q1 2024 GDP reading.
Later on, the closely watched U.S. core PCE price index – the Fed’s preferred inflation measure – will be released. And if that doesn’t cause extra volatility for the U.S. dollar, then maybe mid-tier data releases like personal income and spending and UoM’s final consumer inflation expectations will!
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