U.S. equities and crude oil prices took cues from individual catalysts on Wednesday and traded against their intraweek trends.
Meanwhile, the U.S. dollar edged lower on speculations of a currency intervention from Japanese officials.
Missed yesterday’s market headlines? We gotchu!
Headlines:
- Australia Melbourne Institute leading index remained flat in June
- U.K. CPI rate held steady in June at 2.0% y/y but services price growth rate remains elevated
- U.K. retail price index for June: 2.9% m/m as expected (3.0% previous)
- Euro Area final CPI for June: 2.5% as expected; Final core CPI maintained at 2.9%
- Foreign investment in Canadian securities surpassed Canadian investment in foreign securities for a second consecutive month in May
- U.S. building permits rose from 1.40M to 1.45M (1.40M expected) in June; Housing starts increased from 1.31M to 1.35M (1.30M expected)
- U.S. industrial production for June: 0.6% m/m (0.3% expected, 0.9% previous)
- FOMC voting member Thomas Barkin said he wants to “proceed deliberately” on interest rate changes and favors policies “based on where we are today”
- FOMC voting member Christopher Waller believes recent economic data is consistent with a “soft landing” and thinks they’re “getting closer” to an interest rate cut
- EIA crude oil inventories decreased by 4.9M barrels in the week ending July 12, more than the expected 3.4M-barrel decrease and the expected 0.9M-barrel downtick
- Using data gathered by July 8, Fed’s Beige Book report noted marginal improvement in employment, lower growth expectations, and weaker retail activity
- Australia’s jobless rate ticked higher in June but underlying data pointed to labor market strength
Broad Market Price Action:
Dollar Index, Gold, S&P 500, Oil, U.S. 10-yr Yield, Bitcoin Overlay Chart by TradingView
The Asian trading session was pretty quiet, with major assets mostly sticking to their levels from the U.S. session.
The plot thickened at the start of the European session when the yen suddenly surged, sparking rumors of a currency intervention. While there were no official confirmations, Japan’s top currency diplomat, Masato Kanda, hinted at possible action, saying, “I have no choice but to take appropriate action against excessive fluctuations driven by speculation.”
Later, the market’s attention shifted to the escalating trade tensions between the U.S. and China. Trump claimed that Taiwan had taken “about 100 percent” of America’s chip business, while a Bloomberg report highlighted Biden’s plans to impose tougher trade rules on chip-making companies.
This hit the semiconductor sector hard, leading to mixed results for U.S. equity indices. The S&P 500 and the Nasdaq saw significant drops, while the Dow managed to trade higher. Bitcoin (BTC/USD), usually considered a risky asset, also dipped to around $64,000.
Meanwhile, USD/JPY and the weakness in the U.S. dollar pushed spot gold to new record highs of $2,483 before it pulled back to around $2,450. 10-year U.S. Treasury yields also fell to multi-week lows near 4.15%.
U.S. crude oil prices were influenced by the weak dollar and a surprise drop in U.S. crude oil inventories, reaching $82.80 before falling sharply by the end of the day.
FX Market Behavior: U.S. Dollar vs. Majors:
Overlay of USD vs. Major Currencies Chart by TradingView
The U.S. dollar traded in ranges early in the day though it did weaken against Kiwi following a weaker-than-expected New Zealand CPI report.
During the European session, all eyes were on USD/JPY as it plunged from 158.60 to 156.15 within a few hours. While a currency intervention is not confirmed, it’s also not NOT confirmed, ‘namsayin? We’ll know more at the end of the month when the BOJ publishes its currency reports.
In any case, the U.S. dollar took a hit across the board and didn’t find much support until the U.S. session. That’s when concerns over U.S.-China trade tensions drove investors to seek safer assets. The dollar continued to lose ground against other safe havens like the Japanese yen and Swiss franc but managed to regain some losses against the euro, British pound, and commodity-related currencies.
Upcoming Potential Catalysts on the Economic Calendar:
- Switzerland’s trade balance at 6:00 am GMT
- U.K.’s June jobs data at 6:00 am GMT
- ECB’s policy decision at 12:15 pm GMT, presser to follow at 12:45 pm GMT
- U.S. initial jobless claims at 12:30 pm GMT
- FOMC voting member Mary Daly to give a speech at 10:05 pm GMT
- U.K. GfK consumer confidence report at 11:01 pm GMT
- Japan’s national core CPI at 11:30 pm GMT
- FOMC voting member Michelle Bowman to give a speech at 11:45 pm GMT
Traders are in for a busy European session as the U.K. drops its June labor market data while the European Central Bank (ECB) gives its monetary policy updates.
We won’t see top-tier reports scheduled during the U.S. session, so keep closer tabs on market themes after the European session data releases and overall risk sentiment.
