Daily Market Recap – September 16, 2024

Headlines:

• Chinese economic data released on Saturday showed mostly disappointing results:

  • Industrial production for August: 4.5% y/y (vs. 4.7% expected, 5.1% previous)
  • Retail sales fell 2.1% y/y in August (vs. 2.5% expected), following a 2.7% decline in July
  • Fixed asset investment rose 3.4% ytd/y in August (vs. 3.5% expected, 3.6% previous)
  • Unemployment rate increased from 5.2% to 5.3% in August

• Former President Trump survived another assassination attempt in Florida over the weekend.

• Russian President Putin has ordered an increase in troop numbers from 180,000 to 1.5 million.

• Bank of Canada (BOC) Governor Macklem reiterated a readiness to lower rates more quickly if downside risks intensify.

• New Zealand’s BusinessNZ services index improved to 45.5 in August, up from 45.2, with July’s reading revised higher. Employment rose to its highest level since March.

• Israel’s Prime Minister Netanyahu issued a warning to Yemen’s Houthis after a missile was fired into Israel on Monday.

• Swiss Producer Price Index (PPI) for August: 0.2% m/m (vs. 0.1% expected, 0.0% previous).

• Rightmove reported that U.K. average new seller asking prices rose 0.8% m/m in September, reversing a 1.5% dip in August.

• ECB Chief Economist Philip Lane suggested that the central bank should continue with gradual interest rate cuts.

• Euro area international trade in goods surplus for July was €21.2 billion, compared to €6.7 billion in July 2023. Exports increased by 10.2% y/y, while imports rose 4.0% y/y.

• Canadian manufacturing sales in July: 1.4% m/m (vs. 1.7% m/m in June).

• Chinese banks remain closed for the Mid-Autumn Festival.

Market Price Action:

At the start of the trading week, most asset classes experienced subdued volatility, with Chinese markets closed for the Mid-Autumn Festival.

Bitcoin and the U.S. dollar both trended lower, while gold remained near its record highs as investors stayed cautious ahead of the FOMC decision. U.S. equity indices had a mixed performance: the Dow and S&P 500 ended higher, while the Nasdaq fell by 0.47%.

Crude oil was an exception. Initially declining, likely due to the negative Chinese economic data impacting global demand, the commodity later gained ground as geopolitical tensions rose. Israel issued a stern warning to the Houthis after a missile attack, which helped lift oil prices.

FX Market Behavior: U.S. Dollar vs. Majors

• U.S. Dollar: The greenback trended lower against major currencies, approaching year-to-date lows, amid ongoing market speculation about potential Federal Reserve rate cuts.

• Euro (EUR): The euro appreciated as the dollar weakened, supported by positive economic data and the European Central Bank's policy outlook.

• Japanese Yen (JPY): The yen showed resilience, benefiting from its safe-haven status amidst global uncertainties.

• British Pound (GBP): The pound was mixed, influenced by domestic economic data and anticipation of the Bank of England's policy decisions.

• Australian Dollar (AUD): The Aussie dollar recovered some losses as expectations for a more dovish Fed supported higher gold prices and limited the downside for the currency.

In the forex market, volatility was high throughout the day as the U.S. dollar struggled against its peers.

Despite Japanese markets being closed on Monday, USD/JPY dropped to its lowest level in 12 months but recovered slightly after the Empire State Manufacturing Index came in much stronger than expected.

USD/CAD also saw an uptick following the data, but the Canadian dollar struggled to capitalize on the weaker greenback and rising crude oil prices, partly due to dovish comments from BOC Governor Macklem over the weekend.

The dollar resumed its decline against most major currencies, including the Australian dollar, New Zealand dollar, and British pound, pushing the U.S. dollar index closer to its year-to-date lows.