General Daily Market Recap – August 13, 2024

Lower pressure in US producer prices fueled speculation about a Fed rate cut and inspired risk-taking in markets.

How did your favorite assets trade on Tuesday?

Let’s look at the major headlines that have been in the spotlight:

Titles:

• Westpac: Australian consumer sentiment index improved from 82.7 to 85.0 in August as concerns about further RBA rate hike eased
• Australian Wage Price Index for Q2 2024: 0.8% q/q (0.9% expected and previously)
• NAB: Australian Business Trust fell from 3 to 1, revised down, in July
• Japan preliminary orders of machine tools gained another 8.4% y/y in July after rising 9.7% y/y in June
• Change in the number of UK claimants for July: 135K (14.5K expected, 36.2K previously); Unemployment rate fell from 4.4% to 4.2% in June; Average earnings fell from 5.7% to 4.5% in the three months to June
• The International Energy Agency (IEA) kept its forecast for global oil demand steady in 2024, but lower in 2025 due to China’s weak outlook.
• German economic sentiment ZEW for August: 19.2 (32.6 expected, 41.8 previously)
• ZEW Economic Sentiment in the Eurozone fell from 43.7 to 17.9 (vs. 35.4 expected) in August
• China’s new bank loans contracted from CNY 2.13M to CNY 260M in July
• NFIB US Small Business Optimism Index rose from 91.5 to 93.7 in July, the highest reading since February 2022
• US producer price index for July: 0.1% m/m (0.2% expected and previously); Core PPI fell from 0.3% to 0.1% (0.2% expected); Annual PPI fell from 2.7% to 2.2%
• FOMC Voting Member Raphael Bostic says “a rate cut is coming” but needs “a bit more data” before endorsing lower interest rates
• The API reported an inventory draw of 5.205 million barrels versus estimates of a 2 million barrel decline for the week ending Aug. 9

Broad Market Price Action:

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

The return of Japanese traders from vacations didn’t bring much action to major assets in the Asian session, with markets mostly trading in tight ranges as everyone awaited more meaningful data releases.

However, things picked up again in the US session. Weak US PPI reports fueled speculation that the Fed may cut interest rates sooner rather than keep them higher for longer.

That talk of a potential Fed interest rate cut, along with easing concerns about tensions in the Middle East, gave US stocks a solid boost. The S&P 500 hit two-week highs near 5,430 and the NASDAQ breached the 19,000 mark. Meanwhile, US 10-year Treasury yields fell to 3.85% and gold prices remained below $2,475.

US crude oil prices missed the upside, likely due to easing concerns in the Middle East, and firms such as OPEC and the IEA cut their demand forecasts due to a weaker outlook for Chinese demand. WTI crude tested $80.00 but ended the day closer to $78.40.

Currency Market Behavior: US Dollar vs. Majors:

USD chart overlay against major currencies by TradingView

Forex price action was driven by individual catalysts earlier in the day. The return of Japanese traders pressured the yen during the Asian session, while the Aussie and Kiwi found support from persistently high wage pressures in Australia and positioning ahead of the RBNZ decision.

Sterling rose after a drop in the UK unemployment rate, but was unable to hold on to those gains as traders shifted their focus to weaker wages growth. The euro, which had weakened in late Asian trade, barely flinched as Germany’s ZEW economic sentiment index fell to its lowest level in two years.

During the US session, the dollar traded broadly weaker as disappointing US PPI reports fueled speculation about Fed rate cuts. This pushed 10-year US Treasury yields lower and encouraged risk-taking in the markets.

Future potential catalysts for the economic calendar:

• UK CPI reports at 6:00 GMT
• France final CPI at 6:45 GMT
• UK House Price Index at 8:30 GMT
• Quarterly change in euro area employment at 9:00 GMT
• Euro zone GDP flash at 9:00 GMT
• Euro zone industrial production at 9:00 GMT
• US CPI reports at 12:30 pm GMT
• EIA crude oil stocks at 2:30 pm GMT
• RBNZ Governor Orr will give speeches at 6:00 pm and 7:30 pm GMT
• New Zealand Food Price Index at 22:45 GMT
• Japan’s preliminary GDP at 23:50 GMT
• Melbourne Institute Inflation Expectations at 1:00 GMT (15 August)
• Australian jobs data at 1:30 GMT (August 15)

European data reports will heat up today, with the UK and France releasing their latest inflation data. In the Eurozone, we will not only see the first readings of the GDP, but also the quarterly figures from the labor market.

Then Uncle Sam will print his inflation reports, which could fuel speculation about a Fed rate cut. Watch your USD pairs and overall risk sentiment when the report is released!