Just when it seemed that August was off to a lazy start, financial market volatility kicked into high gear right around the New York session.

What happened then?

Here’s a quick rundown of the headlines and economic updates that affected the markets:

Headlines:

  • Australian import prices recovered by 1.0% quarter-on-quarter in Q2 2024 vs. previous 1.8% slump and expected 0.9% uptick
  • Chinese Caixin manufacturing PMI in July: 49.8 (51.4 expected, 51.8 previous)
  • Australia commodity prices down by 3.0% year-on-year in July, up from earlier 3.5% decline
  • BOE cut interest rates by 0.25% from 5.25% to 5.00% in a “finely balanced” 5-4 vote
  • BOE Governor Bailey cautioned against anticipating consecutive rate cuts as upside risks to services inflation remain
  • U.S. Challenger job cuts slowed from 19.8% year-on-year to 9.2% in July
  • U.S. weekly initial jobless claims at 249K (236K expected, 235K previous)
  • U.S. preliminary unit labor costs for Q2 2024: 0.9% q/q (1.8% expected, previous reading downgraded from 4.7% to 4.0%)
  • Canada’s manufacturing PMI slipped from 49.3 to 47.8 in July to reflect sharper contraction
  • U.S. ISM manufacturing PMI in July: 46.8 (48.8 expected, 48.5 previous)
  • U.S. ISM manufacturing PMI prices component in July: 52.9 (51.9 expected, 52.1 previous)
  • Amazon missed Q2 2024 revenue expectations, business forecasts lowered
  • Intel announced 15% workforce cuts and a suspension of its dividend starting in the fourth quarter
  • Snap earnings mostly met estimates but issued weak Q3 guidance

Broad Market Price Action:

Dollar Index, Gold, S&P 500, Oil, U.S. 10-yr Yield, Bitcoin Overlay Chart by TradingView

Dollar Index, Gold, S&P 500, Oil, U.S. 10-yr Yield, Bitcoin Overlay Chart by TradingView

Most major asset classes cruised sideways early on, as market players probably decided to take it easy after the FOMC decision the previous day.

Not even the disappointing Chinese Caixin manufacturing PMI triggered a strong risk reaction, with U.S. equities and crude oil staying in tight ranges until the New York session rolled along.

Weaker than expected U.S. ISM manufacturing PMI seemed to trigger a sharp risk-off move, as oil, bitcoin, and the S&P 500 index tumbled after the release. Treasury yields also tanked since the decline in the employment component upped the odds for a weak NFP release, thereby lifting September Fed rate cut expectations as well.

Bitcoin managed to regain lost ground, recovering to the $65,000 zone before the end of the day, while gold held its ground throughout the day. U.S. equities continued to reel from the downturn in the tech sector, as Amazon shares tumbled 7% after the company missed revenue expectations for Q2 while Intel announced massive workforce cuts that pulled its shares down by nearly 20%.

FX Market Behavior: U.S. Dollar vs. Majors:

Overlay of USD vs. Major Currencies Chart by TradingView

Overlay of USD vs. Major Currencies Chart by TradingView

While some dollar pairs were off to a bit of a quiet start, USD/JPY was as jumpy as it had been in the past few days, dipping sharply lower in the aftermath of the FOMC decision. The yen pair pulled higher right until the start of the New York session, before it resumed its descent.

Sterling also chalked up a few decent moves, cruising higher versus the dollar ahead of the BOE rate decision then retreating upon getting wind of an interest rate cut. The Aussie, which had a solid start, returned its gains when the Asian session came to a close.

The ISM manufacturing PMI released sparked a mixed reaction among the majors, as the dollar continued to edge lower versus its lower-yielding peers (JPY and CHF) while advancing against the rest of its forex counterparts.

Upcoming Potential Catalysts on the Economic Calendar:

It’s NFP Friday, ladies and gents!

Brace yourselves for additional volatility among dollar pairs and likely across the financial markets, as the outcome of the July U.S. jobs report will probably impact September Fed rate cut expectations.

Before that, do keep an eye out for big moves from the Swiss franc since the CPI release could shape easing forecasts for the Swiss National Bank (SNB) too!