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Market Recap:
Overnight, technology stocks dragged on Wall Street, leading to a mixed performance among major indices. The Nasdaq closed down by 1.3%, the S&P 500 fell by 0.8%, while the Dow Jones managed a positive close, up by 0.5%. U.S. 10-year yields dipped by 3bps ahead of the FOMC decision, while crude oil prices dropped by 0.7%, settling at $75.3 a barrel.
In currency markets, the AUD/USD fluctuated within a 0.6529 to 0.65625 range ahead of crucial inflation data. Similarly, the greenback held its ground with the AUD/USD sliding back to 0.6535 and the NZD/USD to 0.5890. EUR/USD and GBP/USD also saw minor fluctuations, trading back to 1.0825 and 1.2845 respectively, while USD/JPY stayed within the 154.70/90 range.
Day Ahead:
A busy day is anticipated, starting with Australia’s Q2 CPI release, a pivotal indicator ahead of the Reserve Bank of Australia’s (RBA) Board meeting on August 6. Market expectations suggest a trimmed mean CPI inflation for Q2 at +0.9% q/q, which would represent an improvement from Q1’s +1.0% q/q reading but still above the RBA’s forecast. Depending on the data, the RBA’s decision on interest rates could swing between holding steady or increasing by 25bp to 4.60%.
In Japan, the Bank of Japan (BOJ) Policy Board is set to announce its monetary policy decision. Although only a minority of economists expect a rate hike, market consensus points to a potential 10bp increase in the short-term policy rate. The BOJ is also expected to detail plans for reducing bond purchases, initially cutting back from JPY 6 trillion to JPY 5 trillion monthly.
China will release its NBS manufacturing PMI for July, with expectations pointing to a subdued reading of 49.4, reflecting ongoing economic weakness. The Eurozone is also in focus with the release of the CPI for July, anticipated to ease further with a core measure likely falling to +2.8% y/y.
In the U.S., markets are keenly awaiting the FOMC rate decision. While the Fed Funds rate is expected to remain unchanged, the tone of the communication will be crucial, potentially setting the stage for a rate cut in September. The Employment Cost Index will also provide further insights into labor cost growth, with consensus predicting a moderation to +1% q/q in Q2.
Economic Data to Watch:
- NZ – June Building Permits m/m
- JP – June Preliminary Industrial Production m/m and June Retail Sales m/m
- JP – BOJ Target Rate (Lower & Upper Bound)
- AU – Q2 CPI q/q
- AU – June Private Sector Credit m/m
- AU – Q2 Retail Sales Ex-Inflation q/q
- CN – July Manufacturing PMI and July Non-Manufacturing PMI
- JP – June Housing Starts y/y
- EU – July CPI Estimate y/y
- US – July 26 MBA Mortgage Applications and July ADP Employment Change
- CA – May GDP m/m
- US – Q2 Employment Cost Index
- US – June Pending Home Sales m/m
- AU – July Core Logic House Prices m/m
- US – FOMC Rate Decision (Lower & Upper Bound)
Disclaimer: The information provided in this daily market update is for informational purposes only and should not be considered as financial advice. Trading Forex and CFDs involves significant risk of loss and may not be suitable for all investors. Past performance is not indicative of future results. CA Markets does not guarantee the accuracy or completeness of the information provided, and we recommend consulting with a qualified financial advisor before making any trading decisions. Users are solely responsible for their own trading activities and decisions.
