General Daily Market Recap – September 18, 2024

As the Fed announced a further 0.50% interest rate cut and hinted at more easing, how did financial markets react to the news?

Did we see a uniform reaction across the main asset classes or were other stocks in the spotlight?

Check out the latest market updates!

Titles:

• NZ’s current account deficit widened in Q2 from an improved NZD 3.83 billion (previous deficit of NZD 4.36 billion) to NZD 4.83 billion (a deficit of NZD 3.95 billion expected)
• BOC official Rogers said core measures of inflation should ease and policymakers want to see more progress
• Japanese core car orders fell 0.1% m/m (0.4% est., 2.1% previously) in July
• Japan’s trade deficit eased from 0.68T JPY to 0.60T JPY (forecast 0.96T JPY) as a weak yen inflated the value of imports, exports rose 5.6%
• Australia’s leading MI index fell 0.1% in August (previous reading erratic)
• API: Private oil stocks rose 1.96 million barrels (-0.1 million expected)
• August UK headline CPI (2.2% y/y) and core CPI (3.6% y/y) print as expected; Services inflation rose from 5.2% to 5.6%
• Eurozone final headline and core CPI were unchanged at 2.2% and 2.8% year-on-year respectively in August,
• EIA crude oil inventories fell 1.6 million barrels (-0.2 million forecast, +0.8 million previously)
• U.S. building permits rose from 1.41 million to 1.48 million and housing starts rose from 1.24 million to 1.36 million in August
• The summary of BOC deliberations noted weaker household spending and residential investment, rising unemployment
• FOMC cuts interest rates by 0.50% In an 11-1 vote, dot chart forecasts suggested further cuts of 0.50% for 2024
• The Fed cut estimates for headline and core inflation this year, while revising the unemployment rate estimate higher from 4% to 4.4%
• During press time, Fed Chairman Powell reiterated their commitment to price stability, but also noted that they needed to address labor market risks

Broad Market Price Action:

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

Financial markets appeared to be very choppy during the FOMC day as there was no “calm before the storm” during the previous trading sessions.

Crude got off to a weak start, giving back most of the previous session’s gains in New York and falling back to near-term support around $68.65 a barrel as the API reported a surprise rise of 1.96 million barrels in private oil stocks. However, energy commodities rose as U.S. markets opened and got a further boost from a larger-than-expected 1.6 million barrel cut in EIA crude inventories.

Treasury yields rose sharply during the session in London as investors likely eased their bond holdings, before the Fed’s decision to cut US borrowing costs by 0.50% eased sharply.

Gold rallied after the announcement, but gains quickly reversed when key Powell played down hopes of more aggressive easing moves in the near term.

US stock indexes were walking cautiously ahead of the FOMC announcement, and the larger-than-expected rate cut appeared to trigger a brief increase in risk. However, indices quickly gave back their post-FOMC gains to close marginally in the green for the day.

Currency Market Behavior: US Dollar vs. Major:

USD chart overlay against major currencies by TradingView

The dollar started the day in the red against its currency counterparts, particularly the yen, which got a boost from better-than-expected Japanese trade data. As it turned out, the country’s trade deficit narrowed even after a currency depreciation inflated the value of imports, thanks to an impressive 5.6% rise in exports – the ninth consecutive monthly gain.

The Kiwi also got off to a good start despite a weaker-than-expected current account balance, advancing further north against the greenback during the London session before retreating as US markets opened .

The rest of the major currencies appeared to be trading in wider ranges than usual leading up to the FOMC decision, which then triggered a sharp selloff for the US currency in general. After all, Fed policymakers announced a jumbo 0.50% interest rate cut, an easing move not seen since the height of the 2008 financial recession, and dot plot forecasts confirmed more rate cuts for the rest of the year 2024.

However, the US dollar soon bottomed out and returned to pre-FOMC levels (and higher!) at press time, while Fed chief Powell appeared to downplay expectations of further rate cuts 0.50% and ensured that the economy remains strong. . However, the Greenback finished slightly lower than most of its peers at the end of the session, except for the Loonie.

Future potential catalysts for the economic calendar:

• Australia Employment Report at 1:30am GMT
• Swiss trade balance at 6:00 GMT
• Swiss SECO economic forecasts at 7:00 GMT
• Monetary policy decision of the BOE at 9:00 GMT
• Initial US Jobless Claims at 12:30 GMT
• US Philly Fed Index at 12:30 GMT
• US Existing Home Sales at 2:00 pm GMT
• GfK UK Consumer Confidence at 23:00 GMT
• Core CPI in Tokyo at 23:50 GMT

Now that the September FOMC decision is over, are markets about to hit the snooze button and call it quits? Probably not!

There is no shortage of top events on today’s economic schedule, starting with the release of the August Australian jobs report during the Asian session, followed by the BOE’s monetary policy decision during market hours in London. Additionally, we have Uncle Sam’s initial weekly jobless claims figure and the Philly Fed Index, which tend to boost USD volatility throughout the day.

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