Daily Broad Market Recap – August 15, 2024

Dollar dominance was the name of the game after the US printed strong retail sales figures.

How did the rest of the currencies and asset classes perform?

Let’s discuss the major headlines:

headlines:

• Australia MI inflation expectations in July up from 4.3% to 4.5%
• Australian economy added 58.2K jobs in July (20.2K estimated, previous reading upgraded from 50.2K to 52.3K); jobless rate up from 4.1% to 4.2% instead of holding steady as participation rate increased
• Australia Leading Economic Index (LEI) weakened from 0.3% m/m in May to -0.1% m/m in June
• Chinese economic data turned out mixed:
  • Industrial production slowed from 5.3% y/y to 5.1% in July vs. 5.2% estimated
  • Retail sales rose from 2.0% y/y to 2.7% in July vs. 2.6% estimated
  • Fixed asset investment slowed from 3.9% to 3.6% ytd/y in July, unemployment rate rose from 5.0% to 5.2%
  • Unemployment rate edged higher from 5.0% to 5.2% (5.1% expected) in July
  • New home prices dipped by 0.65% m/m in July after a 0.67% m/m dip in June
• Japan industrial production revised lower from -3.6% m/m to -4.2% m/m in June
• UK monthly GDP steadied in June as expected after a 0.4% m/m uptick in May; preliminary GDP for Q2 2024 eased from an upwardly revised 0.7% q/q to 0.6% q/q as expected
  • Goods trade deficit widened from 18.6B GBP to 18.9B GBP in June
  • Industrial production accelerated from an upwardly revised 0.3% m/m to 0.8% m/m (0.1% expected) in June; Manufacturing production improved from 0.3% to 1.1% (0.2% expected)
  • Preliminary business investment weakened by 0.1% q/q in Q2 2024 after a 0.5% uptick and against the expected 0.4% increase
• Switzerland producer prices stagnated for a second month against the expected 0.2% increase in July
• Canada wholesale sales for June: -0.6% m/m (-0.6% expected, -1.2% previous)
• US retail sales jumped by 1.0% m/m (vs 0.4% forecast) in July after a 0.2% dip in June; Core retail sales grew by 0.4% after an upwardly revised 0.5% growth in June
• US initial jobless claims decreased from 234K to 227K (236K expected) in the week ending August 10
• Empire State manufacturing index improved from -6.6 to -4.7 (-5.9 expected) in August
• Philly Fed manufacturing index for August: -7.0 (5.4 expected, 13.9 previous
• US import prices ticked 0.1% m/m higher in July (vs -0.1% expected, 0.0% previous reading)
• US industrial production weakened by 0.6% m/m in July after a 0.3% increase in June; Capacity utilization rate eased from a downwardly revised 78.4% in June to 77.8% in July
• RBNZ head Orr says that trimming monetary policy restraint its appropriate for now, will proceed cautiously
• New Zealand food price index up 0.4% m/m in July vs. previous 1.0% gain
• NZ PPI input prices up 1.4% q/q (0.5% forecast, 0.7% previous), PPI output prices up 1.1% q/q (0.6% forecast, 0.8% previous)

Broad Market Price Action:

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

The first couple of trading sessions were a snoozefest, as major asset classes cruised in ranges during most of the Asian and European market hours.

Volatility started to pick up as US session traders clocked in, with crude oil picking up on a fresh wave of geopolitical tensions, although the commodity later on returned some of its gains on reports that Israel entered talks about pausing the attacks on Gaza.

Gold prices also started to edge higher, but its rally was cut short when US data points came in mostly better than expected. The drop was short-lived, though, as the precious metal managed to climb back into positive territory before the end of the session.

Meanwhile, Treasury yields chalked up significant gains, as upbeat US spending reports and the weekly initial jobless claims figure led investors to pare expectations of a larger 0.50% Fed rate cut in September.

US equities also held on to their gains until the closing bell, as further signs of strength in the US consumer sector eased fears of a full-blown recession. Stronger than expected earnings figures from Cisco and Walmart also allowed indices to extend their positive streak.

FX Market Behavior: US Dollar vs. Majors:

Overlay of USD vs. Major Currencies Chart by TradingView

It was a relatively busy day on the data front for major currencies, as the schedule was filled with preliminary GDP releases, Australia’s jobs report, a data dump from China, and the US retail sales figures.

Stronger than expected Q2 2024 growth figures from Japan did little to steer USD/JPY in a particular direction, though, while Australia’s employment data spurred a pop higher for AUD/USD as underlying metrics confirmed a robust labor market.

China’s numbers turned out mixed, with industrial production and fixed asset investment slowing while retail sales accelerated, yet the Aussie was able to extend its rally.

The UK also released its monthly GDP for June and preliminary growth figure for the second quarter, keeping GBP/USD on a slow crawl higher as the results came in mostly in line with expectations.

The rest of the majors kept drifting sideways until the US retail sales report reflected stronger than expected consumer spending for July, dampening expectations of a larger Fed rate cut next month. The dollar held on to its gains versus the yen and franc but eventually returned the majority of its gains to the pound and Aussie.

Upcoming Potential Catalysts on the Economic Calendar:

• Japanese tertiary industry activity index at 4:30 am GMT
• UK retail sales at 6:00 am GMT
• Eurozone trade balance at 9:00 am GMT
• Canadian housing starts at 12:15 am GMT
• Canadian manufacturing sales at 12:30 am GMT
• US building permits and housing starts at 12:30 am GMT
• US preliminary UoM consumer sentiment index at 2:00 pm GMT
• FOMC member Goolsbee’s testimony at 5:25 pm GMT

We’ve got another potential market sentiment driver in the form of the US preliminary UoM consumer sentiment indexwhich is considered a leading indicator of spending activity. Keep in mind that investors are pretty jumpy about recession odds these days, so any major surprises could spur huge price swings before the week ends!