The markets started the week by pricing in Trump’s assassination attempt over the weekend, but price action soon took its cues from Fed interest rate cut speculations.
Which assets took advantage of the momentum and which ones saw losses yesterday?
We have a summary for ya!
Headlines:
- BusinessNZ services index in June: 40.2 (previous reading downgraded from 43.0 to 42.6)
- Rightmove U.K. house price index in July: -0.4% m/m (0.0% previous)
- Chinese GDP slowed from 5.3% to 4.7% q/y in Q2 2024 vs. 5.1% forecast; Industrial production slowed from 5.6% y/y to 5.3% vs. 4.9% forecast in June
- Switzerland’s producer prices stagnated (vs. 0.1% expected) in June following a 0.3% decline in May
- Euro Area industrial production fell by 0.6% in May; April’s production revised higher from -0.1% to 0.0%
- Canada’s manufacturing sales slowed down from an upwardly revised 1.4% in April to 0.4% in May (vs. 0.3% expected)
- Empire State manufacturing PMI for July: -6.6 (-5.5 expected, -6.0 previous)
- Fed Chair Powell said CPI readings in Q2 added to their confidence that inflation is cooling, and hinted that they won’t wait until it hits 2% before cutting rates
- FOMC voting member Mary Daly said inflation is “getting nearer” to a sustainable path to 2% but declined to give a rate cut schedule
Broad Market Price Action:
Dollar Index, Gold, S&P 500, Oil, U.S. 10-yr Yield, Bitcoin Overlay Chart by TradingView
With Japan’s markets out on bank holiday, Asian session traders started the week by pricing in the assassination attempt on Trump over the weekend. The potentially increased odds of a Trump win boosted bitcoin (BTC/USD) and the U.S. dollar higher but also weighed on spot gold and crude oil prices.
But the moves didn’t last long and the markets returned to pricing in a Fed rate cut. Gold hit new highs near $2,439 before settling back down to the $2,420 area. Bitcoin extended its gains to $64,000, and U.S. equities flirted with their record highs while U.S. Treasury yields saw limited gains.
Crude oil was an exception as it remained below $82.50 especially after a weaker-than-expected Chinese GDP release brought on global demand concerns.
FX Market Behavior: U.S. Dollar vs. Majors:
Overlay of USD vs. Major Currencies Chart by TradingView
The increased odds of a Trump presidency following an assassination attempt over the weekend started the U.S. dollar on strong footing against some of its counterparts.
USD’s strength didn’t last long as Asian session traders soon returned to pricing in an early and maybe even multiple Fed rate cuts this year.
The dollar received fresh bearish pressure during the early European session and then again at the start of the U.S. session before Powell’s speech helped push the currency higher.
Whether it was profit-taking or increased demand for U.S. equities, the dollar traded higher even after Powell hinted that the Fed won’t wait for inflation to hit 2% before cutting interest rates.
Upcoming Potential Catalysts on the Economic Calendar:
- Italy’s trade balance at 9:00 am GMT
- Euro Area trade balance at 9:00 am GMT
- Euro Area ZEW economic sentiment at 9:00 am GMT
- German ZEW economic sentiment at 9:00 am GMT
- Canada’s housing starts at 12:15 pm GMT
- Canada’s inflation reports at 12:30 pm GMT
- U.S. retail sales at 12:30 pm GMT
- U.S. business inventories at 2:00 pm GMT
- U.S. NAHB housing market index at 2:00 pm GMT
- New Zealand quarterly CPI at 10:45 pm GMT
Currencies like EUR, CAD, and NZD may take their cues from more than broader market themes today!
Keep close tabs as the Euro Area prints economic sentiment reports while Canada and New Zealand release their latest inflation reports.
