General Daily Market Recap – August 12, 2024

Market price action was mixed earlier in the week as some traders sat on the sidelines ahead of this week’s data release, while others anticipated heightened tensions in the Middle East.

Which of your closely watched assets have seen increased volatility and directional price action?

We break them down today:

Titles:

• RBA Deputy Governor Andrew Hauser advocated a more flexible approach to policy-making, where decisions are based on different scenarios rather than rigid forecasts
• Germany’s wholesale price index rose 0.3% m/m in July after falling 0.3% in June (0.2% expected)
• Canadian Building Permits fell a further 13.7% m/m in June after a 12.7% drop in May
• Cleveland Fed inflation expectations cut from 3.8% y/y to 3.4% y/y in Q3 2024
• The US budget deficit rose from $66.0 billion in June to $243.7 billion in July as spending (+16%) outpaced deferred tax receipts (+12%)
• Visitor arrivals from New Zealand fell 0.2% m/m in June after a 4.0% rise in May
• Producer price inflation in Japan accelerated from 2.9% y/y to 3.0% y/y in July

Broad Market Price Action:

Dollar Index, Gold, S&P 500, Oil, US 10 Year Yield, Bitcoin Overlay Chart by TradingView

A bank holiday in Japan kept things fairly quiet during the Asian trading session, and with no major data releases and some caution ahead of this week’s key events, that calm extended to European markets.

Oil prices saw a bit more movement, rising from $76.75 to $80.00, largely driven by rising tensions in the Middle East. There is talk that Iran may be preparing to attack Israel, which could explain why the US has sent a guided missile submarine and accelerated the deployment of the Abraham Lincoln carrier group to the area. That said, gains were somewhat limited after OPEC cut its demand forecast for 2024 due to a weaker outlook for China.

In the US, gold prices also rose, moving from $2,425 to $2,470, while 10-year US Treasury yields fell below 3.9%. That decline could be due to growing expectations that this week’s US inflation reports could spark talk of a Fed rate cut.

Currency Market Behavior: US Dollar vs. Majors:

USD chart overlay against major currencies by TradingView

The US dollar had a mixed day in the markets, slipping against “riskier” currencies while holding on to gains against other safe havens such as the Japanese yen and Swiss franc. The greenback’s weakness against riskier assets could be linked to lower US 10-year Treasury yields, along with some profit-taking ahead of the release of key US data this week.

Commodity currencies such as the AUD and NZD started the week on a strong note, benefiting from a rebound from last week’s risk aversion and global growth concerns. Traders also appear to be positioning themselves ahead of the Reserve Bank of New Zealand’s (RBNZ) policy decision and a big batch of UK economic data, which likely contributed to the NZD and GBP’s gains.

Future potential catalysts for the economic calendar:

• UK labor market data at 6:00 GMT
• Machine tool pre-orders from Japan at 6:00 GMT
• German ZEW Economic Sentiment at 9:00 GMT
• NFIB US Small Business Index at 10:00 GMT
• US PPI reports at 12:30 pm GMT
• FOMC member Bostic will deliver a speech at 5:15 pm GMT
• RBNZ policy decision at 2:00 GMT (14 August)

News traders have a busier day, starting with UK labor market figures, which may or may not fuel speculation of a Bank of England (BOE) interest rate cut.

Much later today, the Reserve Bank of New Zealand (RBNZ) will be in the spotlight. While markets see the central bank keeping interest rates at 5.50%, quarterly forecasts and pressure from the RBNZ could encourage increased volatility for the main NZD pairs.