Markets received an added boost of risk-on sentiment following the announcement of another round of stimulus measures from China. At the same time, the Swiss National Bank (SNB) delivered its third consecutive interest rate cut and signaled the possibility of further reductions ahead.
Market Price Action
Following concerns about China’s commitment to its stimulus efforts, the Politburo responded with concrete fiscal support measures, aiming to meet the government’s growth targets. This announcement sparked renewed risk-taking in the Asian trading session, driving equity futures higher and boosting demand for high-yielding assets like gold and bitcoin. As a result, BTC/USD tested the $65,000 mark later in the day, while the S&P 500 and Dow reached fresh record highs.
However, crude oil struggled to join the rally. The commodity plummeted after news that Saudi Arabia had abandoned its $100/barrel price target and will instead cooperate with OPEC+ to increase output in December. After a brief pullback during the London session, oil resumed its decline, ending the day over 3% lower.
FX Market Behavior: U.S. Dollar vs. Majors
Early in the session, forex traders showed a risk-on appetite, driven by the Chinese Politburo’s announcement of fiscal stimulus measures and a 0.50% cut in the central bank’s reserve ratio requirement. As a result, the safe-haven U.S. dollar weakened, while the Australian and New Zealand dollars led gains, benefiting from the positive sentiment around China’s economic boost.
USD/JPY managed to rebound after an initial dip during the London session, supported by upbeat U.S. economic data. The Q2 2024 GDP growth figure remained unchanged at 3.0%, and initial jobless claims came in better than expected, helping to stabilize the Greenback.
The dollar saw further gains after Federal Reserve Chair Jerome Powell’s remarks at the Treasury Market Conference, but those gains were short-lived as risk appetite shifted back toward higher-yielding currencies. By the end of the U.S. session, most dollar pairs returned to consolidation mode.
