General Market Analysis – 18/10/24

The Dow Hits New High After Strong Retail Sales – Up 0.4%

The Dow Jones index climbed higher in trading yesterday, reaching another record close following better-than-expected retail sales data. The Dow closed up 0.37%, while the S&P and Nasdaq ended the day nearly flat, down 0.02% and up 0.04%, respectively. US Treasury yields surged after the data release, with the 2-year yield gaining 4.5 basis points to rise to 3.980%, and the 10-year yield jumping 7.9 basis points to 4.095%. The dollar also continued its upward trajectory, with the DXY index adding 0.23% by the end of the day, bolstered by a 25-basis-point rate hike from the ECB alongside more dovish forward guidance. Oil prices fluctuated once again, with Brent closing 0.31% higher at $74.45 a barrel, while WTI fell 0.40% to $70.67. Gold had another strong session, breaking through resistance levels to reach a new all-time high of $2,696.59 before easing slightly towards the close.

Euro Poised for Further Decline After Dovish ECB

The euro appears set for further weakness in the coming days and weeks, following the European Central Bank’s rate cut yesterday and signals that more reductions are likely. Expectations for the cut had increased over recent weeks, with the ECB indicating that inflation was now under control and attention shifting to weak growth data. This has fuelled speculation about further cuts in future meetings. The euro fell 0.3% against the dollar, hitting levels not seen since early August, and traders are now anticipating more downside, with the next target being the August low of 1.0774. Some traders are focusing on cross-currency pairs, such as EUR/AUD, as they believe this will avoid the volatility that the US dollar may face as the election approaches. The EUR/AUD is currently attracting interest after a strong jobs data release in Australia.

Quieter Calendar Expected to Close Out the Trading Week

Today’s macroeconomic calendar is relatively quiet as we approach the end of the trading week, although a few scheduled events may still catch traders’ attention and move markets. In the Asian session, focus will be on Chinese markets, with a significant data release including GDP, industrial production, and retail sales figures. Investors, disheartened by recent government stimulus measures, will be hoping for more positive news. Early in the London session, attention will shift to the UK’s latest retail sales figures. The New York session is expected to be calmer compared to yesterday, with US building permits data and an address by Federal Reserve’s Christopher Waller, who is set to speak in Vienna.

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