Wednesday saw a lack of fresh catalysts, prompting pullbacks and potential profit-taking across major assets.
What market themes influenced your favorite assets despite the quiet session?
Let’s dive in!
Headlines:
- Australia’s inflation eased in August but remains elevated.
- Bank of Japan (BOJ) core CPI held steady at 1.8% y/y in August, as expected.
- Switzerland's UBS economic expectations weakened from -3.4 to -8.8 in August.
- Bank of England (BOE) member Megan Greene advocates a “gradual” approach to rate cuts, citing persistent services inflation and higher long-term growth risks.
- China’s Leading Economic Index declined by 0.2% m/m in August after steady growth in July, with "persistent but not worsening" headwinds to growth.
- U.S. new home sales for August hit 716K (699K expected, 751K previous).
- U.S. EIA crude oil inventories dropped by 4.5M barrels for the week ending September 20 (1.3M-barrel draw expected, 1.6M-barrel decrease previous).
- FOMC voting member Adriana Kugler “strongly supported” a 50 bps September rate cut and favors additional cuts as the Fed shifts focus from inflation to growth.
- People's Bank of China (PBOC) cut its one-year medium-term lending facility (MLF) rates from 2.3% to 2.0%.
- BOJ's July meeting minutes revealed at least two members saw room for further interest rate hikes.
Market Price Action:
The day began calmly as Asian traders continued to assess China’s latest monetary policy adjustments.
Volatility increased during the London session as markets questioned the effectiveness of China’s monetary tweaks without more aggressive fiscal stimulus. Additionally, reports of Israel preparing for a possible ground invasion in Lebanon dampened risk sentiment.
Meanwhile, concerns over weak U.S. consumer confidence data and disappointing European PMIs led investors to take profits, especially with asset prices hitting record highs as the quarter nears its end.
U.S. stocks ended the day mixed. The Nasdaq reached new two-month highs, while the Dow closed in the red. Bitcoin (BTC/USD) failed to break through its monthly highs, sliding from $64,800 to $63,200. Gold remained steady, just below the previous day’s close, and U.S. crude oil prices fell from $71.50 to $69.75.
U.S. 10-year bond yields rebounded from growth concerns and earlier declines, rising from a daily low of 3.73% to finish at 3.79%.
FX Market Behavior: U.S. Dollar vs. Major Currencies:
A combination of global growth concerns and profit-taking contributed to a reversal of some of the U.S. dollar's earlier losses on Wednesday.
The Greenback experienced modest gains during the Asian session following a dip in the previous U.S. session. Demand for the safe-haven dollar increased in the London session as traders became increasingly worried about growth prospects in the U.S., Europe, and China.
As the U.S. session commenced, the dollar gained fresh bullish momentum, likely driven by traders closing out their short USD positions ahead of Thursday’s initial jobless claims report, FOMC member speeches, and Friday’s U.S. core PCE price index data.
Although the dollar surrendered some of its gains after FOMC member Kugler expressed support for additional rate cuts, it still ended the day stronger against most major currencies.
Upcoming Potential Catalysts on the Economic Calendar:
- Germany GfK Consumer Climate at 6:00 AM GMT
- Swiss National Bank (SNB) Policy Decision at 7:30 AM GMT, with a press conference to follow at 8:00 AM GMT
- European Central Bank (ECB) Economic Bulletin at 8:00 AM GMT
- U.S. Final GDP and GDP Price Index at 12:30 PM GMT
- U.S. Initial Jobless Claims at 12:30 PM GMT
- U.S. Core Durable Goods Orders at 12:30 PM GMT
- A series of speeches from FOMC voting members, including Collins, Kugler, Bowman, Williams, Barr, Cook, and Chairman Powell, starting at 1:10 PM GMT
- ECB President Lagarde's Speech at 1:30 PM GMT
- U.S. Pending Home Sales at 2:00 PM GMT
- U.S. Treasury Secretary Yellen's Speech at 3:15 PM GMT
- Tokyo Core CPI at 11:30 PM GMT
Central bankers will take center stage today, starting with the SNB's September policy decision during the European session.
Later, several FOMC voting members, including Chair Powell, are expected to defend the recent 50 basis point rate cut. ECB President Lagarde will also deliver an opening speech that could impact EUR pairs.
Meanwhile, mid-tier U.S. data releases scheduled for later in the day could either bolster or challenge growth concerns in the U.S., potentially influencing overall risk appetite.
