The Japanese yen was the king of pips in the forex market once again, as it chalked up its third consecutive day strongly in the green.
In contrast, U.S. equities suffered steep losses due to a broad tech selloff while commodities slumped as well.
Here are the market headlines you need to know:
Headlines:
- Japanese flash manufacturing PMI in July: 49.2 (50.5 expected, 50.0 previous)
- German GfK consumer climate index in July: -18.4 (-21.1 expected, previous reading upgraded from -21.8 to -21.6)
- French flash manufacturing PMI in July: 44.1 (45.8 expected, 45.4 previous)
- French flash services PMI in July: 50.7 (49.7 expected, previous reading upgraded from 48.8 to 49.6)
- German flash manufacturing PMI in July: 42.6 (44.1 expected, 43.5 previous)
- German flash services PMI in July: 52.0 (53.2 expected, previous reading downgraded from 53.5 to 53.1)
- Eurozone flash manufacturing PMI in July: 45.6 (46.0 expected, 45.8 previous)
- Eurozone flash services PMI in July: 51.9 (52.9 expected, 52.8 previous)
- U.K. flash manufacturing PMI in July: 51.8 (51.1 expected, previous reading downgraded from 51.4 to 50.9)
- U.K. flash services PMI in July: 52.4 (52.5 expected, previous reading upgraded from 51.2 to 52.1)
- U.S. goods trade deficit narrowed from 99.4 billion USD to 96.8 billion USD vs. expected 98.8 billion USD shortfall)
- BOC cut interest rates by 0.25% as expected, signaled “further cuts” to come on downside risks from excess supply
- BOC downgraded growth forecast for 2024 while keeping inflation estimate unchanged
- EIA crude oil inventories fell by 3.7 million barrels vs. estimated reduction of 2.6 million barrels, previous draw of 4.9 million barrels
- U.S. flash manufacturing PMI in July: 49.5 (51.7 expected, 51.6 previous)
- U.S. flash services PMI in July: 56.0 (54.7 expected, 55.3 previous)
Broad Market Price Action:
Dollar Index, Gold, S&P 500, Oil, U.S. 10-yr Yield, Bitcoin Overlay Chart by TradingView
Market correlations seemed to break down again on Wednesday, as asset classes responded to their own individual driving factors.
Commodities and crypto had a mostly good run, with bitcoin keeping its head above water and only retreating upon testing the resistance close to the $67,000 handle.
Crude oil had a few dips early in the day but managed to stay in positive territory, as the EIA inventory report printed a larger than expected reduction in stockpiles. Gold also stayed in the green for the most part, before joining U.S. equities in its tumble.
As it turned out, the plunge in U.S. stock indices was mostly tech driven, as earnings reports from big companies like Alphabet and Tesla failed to impress. Even semiconductor shares tumbled, led by Nvidia and Broadcom, while luxury giant LVMH also reported underwhelming quarterly sales data.
FX Market Behavior: U.S. Dollar vs. Majors:
Overlay of USD vs. Major Currencies Chart by TradingView
Price action among dollar pairs was also a bit of a hot mess, as USD/JPY had its own thing going once again and raked in another set of strong gains for the third day in a row. The franc was also a big winner for the day, with USD/CHF ending 0.68% lower.
Risk aversion already seemed to weigh on the commodity currencies AUD and NZD early in the day, but these higher-yielders managed to pare losses before the U.S. session rolled along. Global PMI reports were printed, although the results were mixed as the numbers confirmed a general slowdown in manufacturing (except in the U.K.) and some green shoots in the services sector.
The Bank of Canada (BOC) announced a 0.25% rate cut as expected, sparking some gains for USD/CAD, although the dollar chalked up its largest winnings against the Aussie and Kiwi as risk-off flows came in full swing later in the session.
Upcoming Potential Catalysts on the Economic Calendar:
- German Ifo business climate index at 8:00 am GMT
- U.S. advance GDP report at 12:30 pm GMT
- U.S. weekly initial jobless claims at 12:30 pm GMT
- U.S. headline and core durable goods orders at 12:30 pm GMT
- ECB head Lagarde’s testimony at 3:00 pm GMT
- Tokyo core CPI at 11:30 pm GMT
- G20 meetings ongoing
The spotlight is likely to shift back to U.S. economic data today, as the advance GDP report for Q2 2024 is lined up, along with the quarterly price index data that could tilt the odds when it comes to Fed easing.
Keep an eye out for the U.S. weekly initial jobless claims data that tends to spark intraday dollar moves, as well as key earnings reports that are likely to influence overall market sentiment once again.
