General Daily Market Recap – September 24, 2024

Central bankers were under the spotlight yesterday and the lack of top-line data made it easier to revise monetary policy biases for major assets.

What titles influenced the price action of the major assets?

We have the deets!

Titles:

• China has announced a series of stimulus measures which include reducing the reserve requirement ratio by 50 bps and the 7-day reverse repo rate from 1.7% to 1.5%
• As expected, the RBA kept rates at 4.35% and reiterated that inflation “remains too high”
• Major central bank members shared their two cents:
  • ECB President Lagarde said high inflation ‘not quite’ defeated, said talking but not coordinating with Powell
  • BOJ Governor Ueda sees inflation “likely” to hit 2% and confirmed willingness to raise rates if their economic outlook materializes
  • RBA Governor Bullock shared that the team has not discussed a rate hike or the size of any potential rate cut. She added that “rates will remain on hold for now”
  • BOE Governor Bailey said “inflation has come a long way” and easing will continue “gradually”
  • Madis Muller of the ECB did not rule out a rate cut in October but said it would be “easier” to decide with more dates in December
  • Voting Member of the FOMC, Michelle Bowman — lone dissenter of 50 bps rate cut — thought the Fed should have moved at a “more measured pace”
  • Bundesbank President Joachim Nagel believes that some factors dragging down the German economy are temporary and that it will pick up again, even if it is expected to remain weak this year
  • BOC Governor Macklem reiterated that it was “reasonable” to expect further rate cuts and said it was closely watching consumer spending and business hiring and investment.
• Germany IfO business climate worsened from 86.6 to 85.4 (86.1 expected) in September as economy sees increased pressure
• S&P CoreLogic Case-Shiller US Home Price Index fell from 6.5% y/y to 5.9% y/y as expected in July
• FHFA US Home Price Index for July: 0.1% m/m (0.2% est., June reading revised above from -0.1% to 0.0%)
• US Consumer Confidence CB it fell from 105.6 to 98.7 (103.9 expected) in September
• API: US Crude Oil Stocks fell 4.339 million barrels (expected to draw 1.1 million barrels, up from 1.96 million barrels previously) in the week ended Sept. 20
• Japan Services Producer Price Index for August: 2.7% y/y (2.6% est., July reading revised down from 2.8% to 2.7%)

Broad Market Price Action:

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

Risk assets and major U.S. dollar peers got a boost in early Asian trade after Chinese officials unveiled plans to stimulate the economy. The measures include cutting PBOC interest rates and the reserve requirement ratio, lowering mortgage rates and allowing companies to use PBOC funding to buy stocks.

China’s stimulus, along with the Fed’s recent 50 basis point interest rate cut, has stoked risk-on sentiment in markets. Traders carried optimism into the European and US sessions, where weaker-than-expected German Ifo business climate data and a soft US CB consumer confidence report took some of the wind out of risk appetite.

Even with these weaker mid-level reports, gold still hit new record highs, closing near $2,660. Bitcoin (BTC/USD) retested its September highs near $64,700, while both the S&P 500 and Dow finished at new highs.

Crude oil, meanwhile, found further support from rising tensions between Israel and Iran-backed Hezbollah in southern Lebanon, hitting new weekly highs around $72.25 before settling near $71.50.

Currency Market Behavior: US Dollar vs. Majors:

USD Overlay vs. Major Currencies Chart by TradingView

The US dollar extended losses as traders continued to price in the Fed’s easing cycle, while central bankers in other major economies determined individual currency moves.

Risk-on sentiment and USD selling gained momentum after China announced easing measures, including cuts in PBOC interest rates and mortgage rates, as well as potential PBOC funding for companies to buy shares.

The yen weakened after BOJ Governor Ueda suggested rate hikes were not imminent. Meanwhile, the Aussie dollar faced a “buy the rumour, sell the news” decline, briefly trading lower despite the RBA’s “demanding holding”.

Elsewhere, the ECB’s Muller signaled a potential rate cut, favoring December over October. BOE Governor Bailey outlined gradual rate cuts, while the BOC’s Macklem suggested further cuts.

The greenback took another hit after a US CB consumer confidence report, closing weaker overall with the biggest losses against commodity currencies and smaller losses against the yen.

Future potential catalysts for the economic calendar:

• UBS Economic Expectations at 8:00 GMT
• BOE member Megan Greene will speak at 8:00 GMT
• US New Home Sales at 2:00 pm GMT
• EIA crude oil stocks at 2:30 pm GMT
• FOMC voting member Adriana Kugler will speak at 20:00 GMT
• Minutes of the BOJ meeting at 23:50 GMT
• RBA Financial Stability Assessment at 1:30 GMT (26 September)

Central banks will remain in focus as there are not many top data releases.

The BOE’s Greene could shake up Sterling price action in the London session, while FOMC voting member Adriana Kugler could defend her vote to cut rates by 50bp during the US session.

Mid-level releases such as US new home sales and EIA crude oil inventories can also influence overall risk sentiment, so be sure to keep your eyes glued to the tube if you have trades open this week!

Don’t forget to check out our new Forex Correlation Calculator!