A lack of fresh market catalysts kept the major assets in ranges early in the day, before central bank speculations and positioning ahead of the U.S. CPI reports caused increased volatility in the U.S. session.
Which assets saw the most action?
We’re discussing yesterday’s market headlines and price reactions!
Headlines:
- RBNZ slashes rates by 50 bps, signals further easing ahead
- Japan preliminary machine tool orders sank 6.5% y/y in Sept (-3.5% previous)
- German trade surplus widened from 16.9B to 22.5B in July (18.9B forecast) as exports rose 1.3% and imports fell 3.4%
- EIA crude oil inventories rose 5.8M barrels (2.0M estimate, 3.9M forecast)
- U.S. federal prosecutors charged crypto firms Gotbit, ZM Quant, CLS Global, and 15 individuals for widespread fraud and market manipulation
- Seized cryptos related to the PlusToken ponzi scheme were moved to exchanges, raising concerns of potential selling
- FOMC September meeting minutes showed members considered a 25bps cut, reject a pre-set policy path
- FOMC voting member Collins said 0.50% cut was prudent given the risks, adds further adjustments likely needed
- FOMC voting member Daly says one or two more cuts likely this year, shares concerns about labor market
Broad Market Price Action:
Dollar Index, Gold, S&P 500, Oil, U.S. 10-yr Yield, Bitcoin Overlay Chart by TradingView
With no fresh catalysts, major assets stayed in range during the Asian session. Chinese stocks lost steam as rallies from stimulus announcements faded, while both Asian and European equities rose on the lack of Middle East tension escalation and hopes for more Chinese stimulus on Saturday.
Traders turned their focus to central banks, as ECB and FOMC members signaled a more gradual pace of easing. The FOMC meeting minutes showed a ‘substantial majority’ supported a 50bps rate cut in September, with some preferring a smaller cut. The larger cut wasn’t due to economic concerns, and the Fed rejected a fixed path, which helped push U.S. stocks higher.
The Dow and S&P 500 hit record highs, U.S. 10-year bond yields reached 4.07%, and the dollar saw broad gains. Gold slipped to weekly lows near $2,608, and bitcoin fell to $60,400, potentially on news of fraud charges against three crypto companies, before recovering to $60,700.
U.S. crude oil prices dipped below $72.00, weighed down by easing Middle East concerns and a surprise rise in U.S. oil stockpiles, before settling under $73.50.
FX Market Behavior: U.S. Dollar vs. Majors:
Overlay of USD vs. Major Currencies Chart by TradingView
The U.S. dollar started the day as a countercurrency, gaining against the Kiwi after the RBNZ’s ‘dovish cut,’ but giving up some pips to both the Aussie and Kiwi when China’s finance ministry announced a Saturday briefing, raising hopes for more fiscal stimulus.
With no major data releases, the dollar stayed range-bound during early European trading. Attention then shifted to Fed rate cut expectations stabilizing and traders getting positioned ahead of the U.S. CPI and PPI reports.
The dollar’s rallies lost some steam after London markets closed, but the Greenback held onto its gains as the FOMC minutes emphasized that the Fed isn’t following a pre-set path.
Upcoming Potential Catalysts on the Economic Calendar:
- U.S. CPI reports at 12:30 pm GMT
- U.S. initial jobless claims at 12:30 pm GMT
- FOMC member Cook to give a speech at 1:15 pm GMT
- FOMC member Barkin to give a speech at 2:30 pm GMT
- FOMC member Williams to give a speech at 3:00 pm GMT
- SNB member Antoine Martin to give a speech at 3:30 pm GMT
- BusinessNZ manufacturing index at 9:30 pm GMT
The U.S. will continue to catch the market’s attention, this time with the September inflation data and a couple more FOMC member speeches. Don’t sleep on the weekly jobless claims and scheduled speeches by the FOMC members, though, as they could also influence expectations for the Fed’s next interest rate cuts.
Keep your eyes glued to the tube especially if you’re trading the U.S. dollar in the next trading sessions!
Don’t forget to check out our brand new Forex Correlation Calculator!