The major assets traded with mixed results as the markets priced in a strong U.S. economy and increased chances of a Fed rate cut.
Spot gold, bitcoin, and U.S. equities gained while U.S. bond yields and the U.S. dollar traded lower.
We have the headlines you need to know about yesterday’s price action!
Headlines:
- Euro Area’s trade surplus for May: €12.3B (€18.0B expected, €18.5B previous)
- Euro Area ZEW economic sentiment weakened from a three-year high of 51.3 to 43.7 (48.1 expected) in July
- German ZEW economic sentiment fell from 47.5 to 41.8 (41.2 expected) in July, its first decline since July 2023
- Canada Consumer Price Index for June 2024: 2.7% y/y (2.9% y/y forecast; 2.9% y/y May); largely due to a large slowdown in gasoline inflation from 5.6% y/y to 0.4% y/y
- On a monthly basis, Canada’s CPI slowed to 0.1% m/m vs. 0.6% m/m previous
- U.S. retail sales take a breather but still up 2.3% from last year
- U.S. NAHB housing market index for July: 42 (43 expected and previous); Home buyers, builders, and developers anticipate lower interest rates
- New Zealand’s inflation slowed in Q2 but caused a bullish reaction for NZD
- FOMC voting member Adriana Kugler is “cautiously optimistic” about easing goods, services, and housing prices, and thinks “it will be appropriate” to ease policies this year
- Melbourne Institute leading index remained flat in June
Broad Market Price Action:
Dollar Index, Gold, S&P 500, Oil, U.S. 10-yr Yield, Bitcoin Overlay Chart by TradingView
With no major catalysts from the Asian and European sessions, the major assets traded with mixed results and traders continued to price in their Fed rate cut biases.
U.S. 10-year bond yields extended a downswing from the previous week to hit a 17-week low of 4.17%. This likely contributed to the U.S. dollar’s slow but steady downswing after Uncle Sam dropped its June retail sales data.
Spot gold extended its July uptrend and hit a new record high near $2,470. Bitcoin (BTC/USD) fell to the $62,500 during the Asian session but eventually shot back up above $65,000 ether (ETH/USD) ETF talks heated up.
Meanwhile, Crude oil shrugged off a decline in U.S. oil inventories reported by API while traders continued to price in China’s disappointing GDP and what it could mean for global demand.
Finally, positive U.S. earnings reports helped push the S&P 500 and Dow indices to new record levels. The Dow, in particular, clocked in its best performance since June 2023.
FX Market Behavior: U.S. Dollar vs. Majors:
Overlay of USD vs. Major Currencies Chart by TradingView
During the Asian session, commodity-related currencies like AUD and NZD extended their intraweek losses against the Greenback. There were no direct catalysts, but traders may have continued to price in disappointing reports from China and New Zealand.
Rumors of Japanese currency intervention also pushed USD/JPY higher during the Asian session.
The dollar gave up some of its gains during the European session before spiking higher at the U.S. retail sales report’s release. While the reports pointed to weaker retail spending in June, the previous months’ data were revised higher and traders focused on overall strength in the U.S. economy.
Despite that, the Greenback gave up its gains and slowly trended lower. Increased risk appetite may have dragged the safe haven lower but lower U.S. bond yields may have also factored in USD ending the day off its intraday highs against AUD, NZD, and JPY and in the red against EUR, GBP, and CAD.
Upcoming Potential Catalysts on the Economic Calendar:
- U.K.’s inflation update at 6:00 am GMT
- U.K. PPI input and output prices at 6:00 am GMT
- U.K. house price index at 8:30 am GMT
- Euro Area final CPI reports at 9:00 am GMT
- U.S. building permits and housing starts at 12:30 pm GMT
- U.S. industrial production at 1:15 pm GMT
- U.S. crude oil inventories at 2:30 pm GMT
- U.S. Beige book report at 6:00 pm GMT
- Australia’s labor market data at 1:30 am GMT
Inflation will be the name of the game during the European session with both the U.K. and the Euro Area printing their June inflation data.
Intraday price action may slow down during the U.S. session with “only” lower-tier U.S. reports on tap, but volatility may pick up again when Australia drops its July jobs report.