Market correlations diverged on Wednesday, with major asset classes reacting to their own specific drivers.
Forex markets were chaotic as well, with the U.S. dollar mostly losing ground throughout the day.
Here are the latest economic updates and headlines that influenced the market movements.
Headlines:
- New Zealand's ANZ commodity prices rebounded by 2.1% year-on-year in August, reversing a previous decline of 1.7%.
- Australia's economy expanded by 0.2% quarter-on-quarter in Q2 2024, in line with expectations, while the previous GDP reading was revised up from 0.1% to 0.2%.
- China's Caixin services PMI dropped from 52.1 to 51.6 in August, slightly below the estimated figure of 51.9.
- The Eurozone’s final services PMI for August was revised down from 53.3 to 52.9, contrary to expectations of no change.
- The U.K.’s final services PMI for August was revised up from 53.3 to 53.7, indicating a faster pace of growth.
- The Eurozone’s Producer Price Index (PPI) accelerated from an upgraded 0.6% month-on-month in June to 0.8% in July, exceeding the forecast of 0.3%.
- OPEC+ is reportedly considering delaying an output increase as Libya prepares to resume production.
- The Bank of Canada (BOC) cut interest rates by 0.25%, bringing them down from 4.50% to 4.25%, and signaled that more easing could be on the way.
- U.S. JOLTS job openings declined from a revised 7.91 million (initially 8.18 million) in June to 7.67 million in July, missing the forecast of 8.09 million.
- The Fed’s Beige Book pointed to "flat or declining" economic activity, with a disappointing outlook for the labor market.
Market Price Action
During Asian market hours, most asset classes traded cautiously, but Bitcoin and crude oil started the day in the red, likely still reacting to the previous session’s selloff.
Energy commodities continued to decline after weaker-than-expected Chinese Caixin services PMI data heightened demand concerns. However, prices briefly turned higher during the London session as investors speculated about a potential delay in the OPEC+ output boost due to Libya’s upcoming resumption of oil production. These gains were short-lived, though, as they were erased by the start of the New York session.
Treasury yields continued their decline after the release of lower-than-expected U.S. JOLTS job openings data, while Bitcoin capitalized on the weakening USD. U.S. equity indices paused their earlier decline, as the disappointing employment figures reignited discussions of a larger Fed rate cut later this month.
FX Market Behavior: U.S. Dollar vs. Majors
Major currency pairs traded within wider-than-usual ranges, with the U.S. dollar showing a slight bearish bias during the Asian trading session. The Australian and New Zealand dollars began the day on the back foot, and the Australian GDP and Caixin services PMI data provided little clarity for these commodity currencies.
As the London session began, the market saw some sideways movement before the dollar resumed its decline. The U.S. JOLTS job openings for July came in below expectations and included a negative revision to the previous month’s figure, fueling speculation of a potential NFP miss later this week.
The Bank of Canada (BOC) announced a 0.25% rate cut as expected and hinted at further easing, but this did not create significant volatility for USD/CAD.
While most of the dollar’s counterparts returned to rangebound trading after the JOLTS report, USD/JPY continued its downward trajectory, closing the day more than 1% lower.
Upcoming Potential Catalysts on the Economic Calendar
- RBA Governor Bullock’s speech at 2:00 AM GMT
- Swiss jobless rate at 5:45 AM GMT
- U.S. Challenger job cuts at 11:30 AM GMT
- U.S. ADP non-farm employment change at 12:15 PM GMT
- U.S. initial jobless claims at 12:30 PM GMT
- U.S. ISM services PMI at 2:00 PM GMT
- EIA crude oil inventories at 3:00 PM GMT
Today brings a new set of leading U.S. jobs indicators, including the Challenger job cuts, ADP non-farm employment change, and ISM services PMI. These reports could provide clues for the highly anticipated non-farm payrolls release on Friday, so be prepared for potential USD volatility.
