Risk aversion popped its head back in the markets during the latest trading sessions, pulling equity indices back in the red and leading gold to test record highs.
Even so, the Greenback was barely able to rake in safe-haven gains, as the U.S currency tumbled to its lowest level in a year.
Check out these headlines and economic updates to see what’s going on!
Headlines:
- People’s Bank of China kept 5-year prime loan rate unchanged at 3.85% and 1-year rate on hold at 3.35% as expected
- RBA monetary policy meeting minutes suggested that interest rates could stay steady for an extended period
- Swiss trade surplus narrowed from downgraded 6.12B CHF to 4.89B CHF (5.44B CHF consensus)
- German producer price index showed 0.2% m/m uptick in July as expected (0.2% previous)
- Eurozone final headline CPI unchanged at 2.6% y/y and core CPI steady at 2.9% y/y
- SNB head Jordan reiterated that franc strength was necessary to protect Swiss economy from imported inflation
- Swiss National Bank cuts limit for banks to get full interest on parked cash
- Canadian July headline CPI: 0.4% m/m (0.4% expected, -0.1% previous) but annual reading fell from 2.7% to 2.5%; core CPI at 0.3% (-0.1% previous) as year-on-year increase slowed from 1.9% to 1.7%
- New Zealand Global Dairy Trade Auction yielded 5.5% gain in prices (0.5% previous)
Broad Market Price Action:
Dollar Index, Gold, S&P 500, Oil, U.S. 10-yr Yield, Bitcoin Overlay Chart by TradingView
So much for starting the week off on a good note! U.S. equity indices capped off their winning streak, as the S&P 500 index closed 0.20% lower while the Nasdaq ended 0.24% in the red on Tuesday.
Risk-off flows were also in full swing for crude oil, as the commodity was in selloff mode throughout the Asian session, likely still driven by easing supply concerns in the Middle East and worries about weak demand from China.
On the flip side, gold was able to flex its safe-haven muscles, as the precious metal took advantage of disinflation troubles and touched record highs just slightly past the $2,500 mark.
Although oil found its way back into positive territory during the London session, it eventually joined the rest of the risk assets that retreated during U.S. market hours.
Interestingly enough, the U.S. dollar and Treasury yields were unable to benefit from risk aversion, as market participants are on edge ahead of Fed head Powell’s speeches in the Jackson Hole Symposium later this week.
FX Market Behavior: U.S. Dollar vs. Majors:
Overlay of USD vs. Major Currencies Chart by TradingView
The dollar chalked up another day in the red against its forex peers, dropping to levels not seen since early January, as traders appear to be waiting on Fed head Powell to confirm expectations for a September rate cut.
While the Aussie took some hits after the PBOC kept prime loan rates on hold and the RBA minutes signaled that rates would probably stay unchanged for much longer, it eventually joined the rest of the major currencies in banking on dollar weakness.
Meanwhile, Canada’s downbeat July CPI report spurred a dip for the Loonie and allowed USD/CAD to keep its losses in check for the rest of the New York session.
The Greenback rounded up its largest losses to its lower-yielding rivals, the yen and franc, as the latter appeared to draw an extra boost from SNB head Jordan’s remarks welcoming CHF strength.
Upcoming Potential Catalysts on the Economic Calendar:
- Canada’s IPPI and RMPI at 12:30 pm GMT
- U.S. EIA crude oil inventories at 2:00 pm GMT
- FOMC meeting minutes at 6:00 pm GMT
- Australia’s flash PMI readings at 11:00 pm GMT
All eyes and ears are likely to be on the FOMC meeting minutes, as traders continue to act all jumpy about the odds of a September interest rate cut. While an easing announcement appears to be priced in, hints about the size of the reduction in borrowing costs could still impact USD direction and overall market volatility.
