The U.S. dollar staged a steady climb against majority of its forex rivals, but the Japanese yen was a clear exception.
Price action among other asset classes was an even hotter mess, as volatility picked up but market correlations seemed to break down.
What’s up with that?!
Here are the market headlines you need to know:
Headlines:
- U.S. Richmond manufacturing index in July: -17 (-7 expected, -10 previous)
- U.S. SEC approved six Ether ETFs set to start trading on Tuesday
- Eurozone consumer confidence index in July: -13 (-13 expected, -14 previous)
- U.S. existing home sales in June: 3.89M (3.99M expected, 4.11M previous)
- Australia’s flash manufacturing PMI in July: 47.4 (47.2 previous)
- Australia’s flash services PMI in July: 50.8 (51.2 previous)
- Senior ruling party officer in Japan urged BOJ to start normalizing monetary policy
- Tesla fell 7.8% post-market after missing earnings estimates
Broad Market Price Action:
Dollar Index, Gold, S&P 500, Oil, U.S. 10-yr Yield, Bitcoin Overlay Chart by TradingView
There seemed to be no major risk driver in play on Tuesday, as higher-yielding assets and safe-havens were all over the place.
Bitcoin cruised lower throughout the day, with traders probably gearing up to move funds towards Ether ETFs that the Securities and Exchange Commission approved for trading. Crude oil had a somewhat positive start but eventually took a sharp dive on renewed ceasefire negotiations between Israel and Hamas, as well as demand concerns stemming from China.
Gold stumbled midday but eventually managed to pull off a good finish while U.S. equities edged lower when Tesla earnings missed estimates.
FX Market Behavior: U.S. Dollar vs. Majors:
Overlay of USD vs. Major Currencies Chart by TradingView
The U.S. dollar raked in gains against its forex counterparts during the entire day, despite mostly weaker than expected data from the Richmond manufacturing survey and the housing sector, even shrugging off the slump in U.S. bond yields.
However, USD/JPY veered away from the pack once more, as traders focused on calls for the Bank of Japan (BOJ) to provide a clearer timeline on normalizing monetary policy. As it turned out, a senior official of Japan’s ruling party, Toshimitsu Motegi, reiterated that the central bank’s extremely low interest rates are putting further downside pressure on the yen even while inflation is outpacing their targets.
Upcoming Potential Catalysts on the Economic Calendar:
- German GfK consumer climate index at 6:00 am GMT
- French manufacturing and services PMIs at 7:15 am GMT
- German manufacturing and services PMIs at 7:30 am GMT
- Eurozone manufacturing and services PMIs at 8:00 am GMT
- U.K. manufacturing and services PMIs at 8:30 am GMT
- BOC monetary policy statement at 1:45 pm GMT
- U.S. manufacturing and services PMIs at 1:45 pm GMT
- BOC press conference at 2:30 pm GMT
- EIA crude oil inventories at 2:30 pm GMT
Today is PMI day for a handful of major economies, which means that risk sentiment could be strongly driven by the general outcome of these leading indicators for the current month.
Apart from that, the Bank of Canada’s (BOC) monetary policy announcement is likely to hog the spotlight as well, especially since many are expecting yet another interest rate cut.