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Market Recap:
Yesterday’s gains on Wall Street were short-lived, with the Nasdaq closing down by 2.3%, the S&P 500 falling by 1.8%, and the Dow Jones dropping by 1.2%. U.S. 10-year yields declined by 6bps to 3.97%, while crude oil prices fell 1.3% to $76.90 a barrel. The AUD/USD traded within a 0.64895 to 0.6560 range before settling at 0.6495/00 ahead of the Asian open.
Final UK and Eurozone manufacturing PMIs beat forecasts, with the UK reading 52.1 against the expected 51.8 and the Eurozone coming in at 45.8 versus the forecasted 45.6. However, Eurozone unemployment for June rose to 6.5%, slightly above the 6.4% estimate, causing EUR/USD and GBP/USD to drop further to 1.0778 and 1.2752, respectively.
The Bank of England (BoE) lowered the Bank rate by 25bps to 5.0% in a close 5-4 vote. Governor Andrew Bailey noted that inflation risks remain skewed to the upside as the BoE raised its 2024 growth forecasts. GBP/USD remained mostly unchanged, trading around 1.2760, while the market priced in an additional 35bps of cuts in 2024.
During the London session, the greenback maintained its gains as U.S. challenger job cuts fell in July (9.2% vs. 19.8% previous). The antipodes stayed within 15pts of their lows at 0.6514 and 0.5939, while EUR/USD and GBP/USD fought back to 1.0790 and 1.2790. USD/JPY found highs at 150.60.
U.S. weekly jobless claims data was slightly weaker than expected, with initial claims printing at 249k against expectations of 236k, while continuing claims were 1.877 million against expectations of 1.855 million. Despite the data, the USD weakened over the NY morning with the local unit hitting 0.6553 highs, while NZD/USD moved up to 0.5970 and USD/CAD fell to lows under 1.3800. USD/JPY meanwhile rose to 150.88 highs.
Later in the session, the U.S. Manufacturing PMI for July was revised up by 0.1 to 49.6, as expected. June Construction Spending declined by 0.3%, well below forecasts of +0.2%, while July ISM Manufacturing printed at 46.8, down from 48.5 and below expectations of 48.8. Despite a beat for Prices Paid, New Orders fell short of expectations, and Employment fell to 43.4 against expectations of 49.2. The USD showed further weakness following the data, with AUD/USD rising to 0.6560 and NZD/USD reaching 0.5984.
However, gains were limited as headlines reported Hezbollah’s claim that Israel had crossed a red line with recent strikes in Beirut and Tehran, prompting threats of a “real” response. This softened risk sentiment, causing Wall Street to turn modest opening gains into losses exceeding 1%. European markets also shifted lower, with the FTSE closing down by 1% and the CAC and DAX shedding more than 2%. Crude oil turned negative, moving to losses of over 1%.
Day Ahead:
The U.S. employment report for July, set to be released this evening, will provide critical insights into the labor market’s health and could impact expectations for monetary policy. In June, the unemployment rate exceeded the 4% threshold for the first time since 2021, though non-farm payroll growth remained solid at +206k m/m.
The AUD/USD remained choppy within its 0.64895/0.6560 range yesterday. Demand is expected at 0.6460, while offering interest remains in the 0.6600/20 range.
Economic Data to Watch:
- AU – June Home Loans Value m/m
- UK – BoE Chief Economist Huw Pill Speaks
- US – July Average Hourly Earnings m/m
- US – July Change in Nonfarm Payrolls
- US – July Unemployment Rate
- SG – July Purchasing Managers Index
- US – June Factory Orders
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.