General Daily Market Recap – August 14, 2024

The RBNZ was in the spotlight earlier in the day with a surprise rate cut, but data releases from the UK and US soon drew attention to other market themes.

How did your favorite assets trade on Wednesday?

Let’s talk about the main headlines:

Titles:

• RBNZ surprised markets with a 25bp rate cut and suggested further interest rate cuts
• Prime Minister of Japan Fumio Kishida announced he will not seek re-election as leader of the ruling Liberal Democratic Party in September
• UK inflation rose from 2.0% y/y to 2.2% y/y, its first acceleration since December; Core CPI fell from 3.5% to 3.3% (3.4% expected)
• UK PPI Input Prices for July: -0.1% m/m (-0.3% expected, -0.4% previous); PPI production was flat (0.1% expected, -0.7% previously)
• GDP of the euro area maintained its 0.3% q/q growth as expected in Q2 2024
• Changing jobs in the euro area rose 0.2% q/q in Q2 2024 after a 0.3% rise in Q1
• US CPI accelerated from -0.1% m/m to 0.2% m/m in July; Core CPI rose 0.2% m/m as expected (0.1% previously); Annual inflation fell from 3.0% y/y to 2.9%
• EIA crude oil stocks reflected an increase of 1.4 million barrels in the week ended Aug. 9, higher than the expected draw of 1.9 million barrels and a decline of 3.7 million barrels in the previous week
• Japan’s preliminary GDP increased from -0.5% to 0.8% (0.6% est.) in Q2 2024

Broad Market Price Action:

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

Most major assets traded in ranges during the early Asian and European sessions, but there were a few bursts of volatility during key data releases.

For example, US spot gold and crude oil prices fell briefly after the RBNZ unexpectedly cut interest rates and suggested it was just the “first step” in an easing cycle. Risk sentiment was also hit after Japan’s prime minister announced he would not run in September’s election, adding a layer of uncertainty to the mix.

Things got more volatile during the European session. US oil prices extended their weekly downtrend, likely on rising concerns over global growth and ceasefire talks between Hamas and Israel. In the US, slightly weaker inflation data fueled speculation about a potential Fed rate cut, which likely helped lift US stocks and pushed 10-year Treasury yields to around 3.81%.

The US dollar, which initially fell following the CPI report, reversed course and likely put pressure on other currencies. Gold prices fell to $2,440, bitcoin (BTC/USD) fell from $61,800 to around $59,000, and WTI crude ended the day near $77.00 after hitting highs near $79.00 dollars.

Currency Market Behavior: US Dollar vs. Majors:

USD chart overlay against major currencies by TradingView

The New Zealand dollar and the Japanese yen drew attention earlier in the day. The NZD was dragged down by a surprise interest rate cut by the RBNZ and signs of more easing. Meanwhile, the JPY was hit in late Asian session trading after news broke that Japan’s prime minister would not seek re-election in September.

In early European trading, the US dollar edged lower against its European counterparts, likely due to some profits ahead of the US CPI release.

The inflation report, which showed lower-than-expected figures for July, fueled talk of a Fed rate cut and pushed the dollar lower for about an hour after the release. However, the Greenback eventually clawed back those losses, possibly because many traders had already anticipated weaker readings after Tuesday’s lackluster US PPI data. By the end of the day, the dollar rallied and finished close to where it opened.

Future potential catalysts for the economic calendar:

• China Industrial Production, Retail Sales, Fixed Asset Investment and Unemployment Rate at 2:00 GMT
• Japan revised industrial production at 4:30 GMT
• UK preliminary GDP at 6:00 GMT
• UK Merchandise Trade Balance at 6:00 GMT
• UK Industrial Production at 6:00 GMT
• UK production output at 6:00 GMT
• Canadian wholesale at 12:30 GMT
• US Retail Sales at 12:30 GMT
• US Empire State Manufacturing Index at 12:30 GMT
• Philly US Fed Manufacturing Index at 12:30 GMT
• US Industrial Production at 13:15 GMT
• US NAHB housing market index at 14:00 GMT
• Leading index Australia CB at 14:30 GMT
• BusinessNZ manufacturing index at 22:30 GMT
• New Zealand PPI reports at 22:45 GMT

Market players are following another round of top data releases, this time starting with China’s data download during the Asian session.

The UK will also release preliminary readings of GDP and industrial production, followed by retail sales figures and some US manufacturing data.

While the reports may not inspire broad and sustained market reactions on their own, these reports can affect individual currencies and overall risk sentiment. Make sure you’re glued to the tube so you don’t miss any potential catalysts!