Markets remain unsettled ahead of this week’s FOMC decision, with intermarket correlations appearing disjointed, despite the U.S. dollar rallying on the upside surprise in headline retail sales. Crude oil experienced its typical volatility, while gold prices continued to ease from recent all-time highs. Equity indices ended the day nearly flat as investors remained on edge, anticipating the Fed’s key announcement.
Curious about other factors driving market movements? Take a look at the latest headlines and economic updates.
Headlines:
- Chinese banks remain closed for the Mid-Autumn Festival holidays.
- Japan’s tertiary industry activity index rebounded by 1.4% month-on-month in July, exceeding the expected 0.8% increase, after a previous 1.2% decline.
- Germany’s ZEW economic sentiment index for September came in at 3.6, missing expectations of 17.1 and down from the previous 19.2.
- The Eurozone’s ZEW economic sentiment index dropped to 9.3 in September, falling short of the expected 16.3 and the prior 17.9.
- Canadian housing starts slowed from 280K to 217K in August, below the forecast of 252K.
- Canada’s headline CPI for August decreased by 0.2% month-on-month (vs. 0.0% expected), with the annual rate slowing from 2.5% to 2.1%, the lowest since February 2021.
- Canada’s core CPI fell by 0.1% month-on-month, with the annual reading dropping from 1.7% to 1.5%, in line with expectations.
- U.S. headline retail sales for August increased by 0.1% month-on-month (vs. -0.2% forecast), with the previous reading revised up from 1.0% to 1.1%; core retail sales rose by 0.1%, missing the 0.2% forecast.
- U.S. industrial production jumped by 0.8% month-on-month in August (vs. 0.2% forecast), while capacity utilization hit 78%, slightly above the 77.9% forecast.
- The U.S. NAHB housing market index rose from 39 to 41 in August, meeting expectations.
- Australia’s CB leading index recovered by 0.1% month-on-month in July, after a previous dip of 0.2%.
- New Zealand’s GDT auction saw dairy prices increase by 0.8%, following a previous 0.4% decline.
- New Zealand’s Westpac consumer sentiment index improved from 82.2 to 90.8 in Q3 2024.
Market Price Action:
While volatility was slightly higher compared to the previous day’s Asian session, major asset classes struggled to find clear direction amid mixed sentiment. Treasury yields fluctuated as traders debated between a 0.25% or 0.50% Fed rate cut ahead of the FOMC decision, eventually rising after better-than-expected U.S. retail sales data.
U.S. equity indices, which had been climbing earlier, battled to maintain gains during the New York session before closing mostly flat. Bitcoin initially saw a steady rise, testing the $61,000 mark before pulling back to the $60,000 level. Meanwhile, gold continued its decline from record highs as the U.S. dollar regained strength.
Crude oil, after a choppy performance during the London session, rebounded following positive U.S. consumer spending data, which could signal stronger demand for energy in the future.
FX Market Behavior: U.S. Dollar vs. Majors:
After trading mostly sideways during Asian hours and the early London session, the U.S. dollar gained ground against most major currencies following the U.S. retail sales release. The headline figure for August showed a 0.1% monthly increase, beating expectations of a 0.2% decline, while July’s figure was revised up from 1.0% to 1.1%. However, the core reading underwhelmed, rising just 0.1% month-on-month, below the anticipated 0.2%.
The dollar's strongest gains were against the yen, with USD/JPY rallying to close over 1% higher for the day. It also gained against the pound, Swiss franc, and New Zealand dollar. Weak Canadian CPI data pushed the Loonie lower versus the dollar, but losses were limited, likely supported by rising crude oil prices. The Australian dollar was the only major currency to close higher against the dollar, despite a dip in gold prices.
It’s shaping up to be a big day for the markets, with the spotlight on the September FOMC decision. Will the Fed opt for a standard 0.25% rate cut, or surprise with a larger 0.50% reduction? For insights on what analysts are predicting and how USD pairs might react, check out our Event Guide for the September FOMC Statement.
markets, with the spotlight on the September FOMC decision. Will the Fed opt for a standard 0.25% rate cut, or surprise with a larger 0.50% reduction? For insights on what analysts are predicting and how USD pairs might react, check out our Event Guide for the September FOMC Statement.
Before the main event, the U.K. CPI release could stir volatility in GBP pairs, as this key inflation report comes just ahead of the Bank of England’s monetary policy decision.
