A lack of data release kept traders on the sidelines on Monday, leading to choppy price action for most of the major assets.
Which headlines dominated the newswires anyway?
Headlines:
- Over the weekend, U.K. Chancellor of the Exchequer Rachel Reeves warned of “difficult decisions around spending, around welfare, and around tax” after a budget audit
- A rocket attack in Israeli-occupied Golan Heights over the weekend increased tensions in the Middle East
- U.K. new mortgage approvals slipped from 60.1K to 60.0K in June
- U.K. net individual lending rose from £2.8B to £3.8B (vs £2.2B expected) in June
- CBI: U.K. retail sales volumes dropped from -24 to -43 in July; retailers cited unfavorable weather and market uncertainty as key contributing factors
- BRC: U.K. shop price index steady at 0.2% in July
- Japan unemployment rate edged lower from 2.6% to 2.5% in June
Broad Market Price Action:
Dollar Index, Gold, S&P 500, Oil, U.S. 10-yr Yield, Bitcoin Overlay Chart by TradingView
The biggest mover on a day with not a lot of data releases was crude oil, which gapped higher following a weekend rocket attack in the Israeli-occupied Golan Heights. However, WTI crude soon traded lower and settled just under $76.00, likely on China’s growth concerns and uncertainty ahead of the OPEC+ meeting on Thursday.
Other major assets saw wide swings until the early U.S. session when a slight recovery in the U.S. 10-year Treasury yields helped boost the U.S. dollar and pulled down bitcoin, gold, and U.S. equities.
Given how price action stabilized a few hours later, it seems like end-of-month flows and profit-taking ahead of this week’s potential catalysts may have also played a role in the major assets’ bearish swings around the London fix.
FX Market Behavior: U.S. Dollar vs. Majors:
Overlay of USD vs. Major Currencies Chart by TradingView
The U.S. dollar started the day on a weak note but steadied at the Asian session open and even gained ground at the start of the European session.
There were no apparent direct catalysts for the move, though traders may have taken profits from their non-USD positions ahead of this week’s top-tier data releases.
The British pound saw bearish pressure during the London session after Rachel Reeves, the U.K.’s new Chancellor of the Exchequer, hinted that the results of her public spending audit may lead to spending cuts and tax hikes. Sterling regained its losses, however, and capped the day close to its open prices.
Meanwhile, the Japanese yen dropped sharply and then saw an upswing at the start of Asian session trading. There were no headlines to explain the move, but it’s a possibility that some JPY traders may be re-positioning ahead of the BOJ’s decision this week.
Upcoming Potential Catalysts on the Economic Calendar:
- KOF economic barometer at 7:00 am GMT
- Spain flash CPI at 7:00 am GMT
- Spain flash GDP at 7:00 am GMT
- Italy preliminary GDP at 8:00 am GMT
- Germany preliminary GDP at 8:00 am GMT
- Euro Area flash GDP at 9:00 am GMT
- U.S. S&P house price index at 1:00 pm GMT
- U.S. CB consumer confidence at 2:00 pm GMT
- U.S. JOLTS job openings at 2:00 pm GMT
- New Zealand building consents at 10:45 pm GMT
- Japan preliminary industrial production at 11:50 pm GMT
- Japan retail sales at 11:50 pm GMT
- Australia CPI reports at 1:30 am GMT (July 31)
Data calendar releases will heat up in the next trading sessions as European countries drop their first GDP and inflation estimates.
In the U.S., the CB consumer confidence and JOLTS job openings releases may impact the markets’ positioning ahead of the Fed’s policy decision and the U.S. NFP release scheduled later this week.
