Daily Broad Market Recap – July 9, 2024

July 10, 2024 6:40 am

Traders kept their eyes and ears peeled during Fed Chairperson Powell’s testimony, but did the event move the markets that much?

Here’s how asset classes reacted, plus the rest of the economic updates you need to know:

Headlines:

  • Australia’s NAB business confidence index improved from -2 to +4 in June
  • Japanese preliminary machine tool orders accelerated from 4.2% y/y to 9.7% in June
  • U.S. NFIB small business index in June: 91.5 (90.3 expected, 90.5 previous)
  • Fed head Powell discussed two-way risks to easing, citing cooling labor market as enough reason to worry about cutting too late
  • U.S. Treasury Secretary Yellen underscores Powell’s views on risks from a slowing labor market
  • New Zealand visitor arrivals rebounded 4.0% y/y in May after earlier 8.8% decline (upgraded from initially reported 9.4% slump)
  • Japanese PPI in June: 2.9% y/y (2.9% expected, previous reading upgraded from 2.4% to 2.6%)

Broad Market Price Action:

Dollar Index, Gold, S&P 500, Oil, U.S. 10-yr Yield, Bitcoin Overlay Chart by TradingView

Dollar Index, Gold, S&P 500, Oil, U.S. 10-yr Yield, Bitcoin Overlay Chart by TradingView

The spotlight was on Fed head Powell’s speech in front of the Senate Banking Committee on Tuesday, as market players had been eager to get more clues on the U.S. central bank’s easing timeline.

Even though Powell refrained from giving clear forward guidance on when they’re likely to cut interest rates, Treasury yields and the U.S. dollar popped higher during his testimony while gold dipped. After all, the Fed Chairperson still noted that they’d rather wait for more inflation data to give them enough confidence to ease.

Meanwhile, crude oil chalked up another day in the red, as investors unwound earlier positions on reports that production in the Gulf Coast carried on without much damage from Hurricane Beryl.

The S&P 500 seemed unbothered, though, as the equity index held its ground during the event before eventually climbing to record highs along with the Nasdaq, thanks to a rally in financial and large-cap tech stocks.

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

Overlay of USD vs. Major Currencies Chart by TradingView

Overlay of USD vs. Major Currencies Chart by TradingView

Dollar pairs tossed and turned throughout the day with a slight bullish tilt, especially against the yen and Kiwi, as markets braced for Fed head Powell’s remarks.

His actual testimony triggered a move higher for the U.S. currency, as traders likely focused on the Fed’s need to wait for more inflation figures before ultimately pressing the easing trigger.

However, the Greenback soon returned its gains versus majority of its counterparts, except against JPY and GBP, as markets also priced in a higher possibility of a September cut (70% versus 63% from a week ago) based on the CME FedWatch tool.

Upcoming Potential Catalysts on the Economic Calendar:

  • BOE MPC member Pill’s testimony at 1:30 pm GMT
  • German Bundesbank President Nagel’s speech at 2:00 pm GMT
  • Fed head Powell’s speech before the House Financial Services Committee at 2:00 pm GMT
  • EIA crude oil inventories at 2:30 pm GMT
  • BOE MPC member Mann’s speech at 3:30 pm GMT
  • FOMC member Bowman’s speech at 6:30 pm GMT
  • FOMC member Goolsbee’s speech at 6:30 pm GMT
  • New Zealand food price index at 10:45 pm GMT
  • FOMC member Cook’s speech at 11:30 pm GMT

Powell has another speech lined up today, this time in front of Congress, so another round of questions on the timing of Fed rate cuts could push USD pairs around again.

Do keep an eye out for a few more speeches by other FOMC officials (Bowman, Goolsbee, and Cook) as their remarks could also put Powell’s rhetoric in perspective ahead of the U.S. CPI release later this week.

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