Daily Broad Market Recap – August 29, 2024

Headlines:

• New Zealand’s ANZ Business Confidence Index surged from 27.1 to 50.6 in August.
• Australian private capital expenditure fell by 2.2% quarter-on-quarter in Q2 2024, compared to a projected 0.9% increase; the previous reading was revised up from 1.0% to 1.9%.
• Japan’s Consumer Confidence Index remained unchanged at 36.7, missing the expected rise to 36.9.
• Spain’s flash CPI eased from 2.8% year-on-year to 2.2% in July, compared to an estimated 2.4%.
• Germany’s preliminary CPI recorded a 0.1% month-on-month decrease in July, contrary to the expected 0.2% increase; the previous gain was revised from 0.3% to 0.1%.
• U.S. Q2 2024 GDP was revised up from an initial 2.8% to 3.0% due to stronger consumer spending, with the price index also adjusted higher from 2.3% to 2.5% quarter-on-quarter.
• The U.S. goods trade deficit widened from $96.6 billion to $102.7 billion, surpassing the expected $97.7 billion shortfall.
• U.S. initial jobless claims decreased to 231,000 for the week ending August 22, compared to a forecast of 232,000 and a previous 233,000.
• U.S. pending home sales fell by 5.5% month-on-month in July, marking the steepest decline since 2001, as high borrowing costs dampened sentiment.
• Swiss National Bank (SNB) President Jordan stated that weak demand in the eurozone is affecting Swiss export activity.
• ECB official and Bundesbank President Nagel suggested that further rate cuts should be cautious, as inflation has not yet reached the 2% target.

Market Price Movements

Major asset classes started the day relatively calm, as investors awaited the release of the second estimate of the U.S. GDP. Volatility picked up slightly around the start of the London session, leading to declines in both crude oil and U.S. bond yields, while Bitcoin continued its steady rise.

Upgrades to both U.S. growth figures and the price index for Q2 2024 triggered gains in risk assets like crude oil and equities, easing concerns about an economic slowdown. The positive data also boosted the dollar and Treasury yields, reflecting optimistic expectations for Friday’s core PCE release.

Conversely, gold prices dropped following the preliminary GDP report but managed to recover quickly after the initial dip. Bitcoin (BTC/USD) reached a peak near $61,000 before retreating to around $59,000 by the end of the U.S. session.

U.S. equities struggled to maintain their post-GDP gains, with the S&P 500 and Nasdaq ending the day roughly flat.

FX Market Behavior: U.S. Dollar Against Major Currencies

Most major currency pairs experienced a slow start, except for NZD/USD, which rose early in the Asian session following a significant improvement in New Zealand’s business confidence index for August.

Throughout the Asian trading session, the U.S. dollar drifted lower against most peers, except against the Japanese yen, which was weighed down by stagnant consumer confidence in Japan for July.

Weaker-than-expected inflation data from the eurozone, particularly Germany and Spain, caused the euro and other European currencies to dip around the start of the London session.

After a period of consolidation, the dollar rallied across the board following the upgrade to the U.S. Q2 2024 preliminary GDP reading. Initial jobless claims also came in better than expected at 231,000, compared to the forecasted 232,000.

However, the U.S. dollar gave back most of its post-GDP gains later in the session as pending home sales fell sharply to record lows due to high borrowing costs. Despite this, the dollar still closed higher against the yen, European currencies, and the Canadian dollar.