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The Japanese yen is in the spotlight again today, with USD/JPY inching up by 0.4% to 158.65 currently. I outlined more on that here with US retail sales data one to watch later in the day. Besides that, the aussie and kiwi are just a touch softer owing to a bit of a spillover from a softer Chinese yuan.

In other markets, gold is eyeing fresh record highs while equities continue to pull higher despite some late selling in Wall Street overnight.

It’s all still to play for in trading this week as Fed chair Powell failed to offer up anything new yesterday. Well, not that it was unexpected anyway. It doesn’t seem like they will surprise to tee up a July rate cut, at least not before the FOMC blackout period.

Looking to the day ahead, the US retail sales data will be the main event. As such, European morning trade will feature a less important agenda for broader markets.

0800 GMT – Italy June final CPI figures0900 GMT – Eurozone May trade balance data0900 GMT – Germany July ZEW survey current conditions, economic sentiment

That’s all for the session ahead. I wish you all the best of days to come and good luck with your trading! Stay safe out there.

On this day in 1969, NASA launched Apollo 11 – the first manned mission to land on the moon.

This article was written by Justin Low at www.forexlive.com.

Even though there was a slight bounce last week, it is tough to be bullish on the kiwi in general currently. The only plausible reason I can think of is perhaps AUD/NZD might be overdue for a correction. Otherwise, the kiwi might be in for more pain moving forward.

In the case of NZD/USD, the pair had been testing the key daily moving averages as of late. And that includes after the more dovish RBNZ last week. It saw a test of both the 100 (red line) and 200-day (blue line) moving averages at the time.

And today, sellers are finding slightly more conviction to test waters below that. There were already several attempts to break the key support region at the end of June and early July. But ultimately, the key technical levels held up.

Right now, the lows around 0.6047-57 are also in focus. So, a firm break below the key daily moving averages and that final support threshold is likely to result in a stronger downside break for NZD/USD.

The first target is likely the 0.6000 mark but the pair might find it tough to find much support considering recent factors in play.

For one, the RBNZ is now among the more dovish central banks when put up against the RBA and Fed in particular. Then, we have China woes continuing to weigh with the yuan slipping once again in trading this week. The US CPI report and stimulus hopes helped to pin USD/CNY back to 7.250 at the end of last week but the pair is now back up to 7.265 on the day.

That is not to mention the fresh breakout in AUD/NZD to its highest levels since October 2022, which is a rather overlooked factor I would say.

This article was written by Justin Low at www.forexlive.com.

US Markets Steady After Trump and Powell – Dow up 0.5%

US markets responded to both the weekend’s shooting incident and a more cautious update from Fed Chair Jerome Powell yesterday, resulting in major indices moving higher with some mixed results in other markets. The Dow led the gains, closing up 0.53%, followed by the S&P and Nasdaq which ended the day up 0.28% and 0.40% respectively. US treasury yields remained largely unchanged, with the 2-year yield decreasing by 1 basis point to 4.451% and the benchmark 10-year yield increasing by 4 basis points to 4.222%. Oil prices saw declines due to concerns over demand, with Brent losing 0.2% to settle at $84.85 a barrel and WTI dropping 0.4% to $81.91 a barrel. Gold initially surged close to record highs after Powell’s remarks but closed the day with a modest gain of 0.4% at $2,421 per ounce.

Dollar in Tug of War in the Week Ahead

The dollar experienced significant volatility yesterday, initially dropping sharply after Powell’s slightly dovish comments before stabilizing as the ‘Trump Trade’ bolstered the greenback. Following the weekend’s assassination attempt on Donald Trump, the likelihood of him securing another presidential term has increased, with market pricing now indicating a 67% probability of his victory in November. This dynamic has left the dollar caught in a tug of war, as the ‘Trump Trade’ tends to strengthen the currency while recent economic data and a more dovish Fed stance weigh it down. Analysts anticipate continued volatility in the coming days and weeks as new developments unfold on both fronts.

Another Busy Day Ahead for Traders

Traders are bracing for another eventful day in global financial markets as they digest recent geopolitical developments, Powell’s statements, and upcoming data releases. Asian markets have a quiet economic calendar, but the return of Japanese traders may reignite discussions on intervention following recent movements in the Yen. European markets expect increased volatility once the US session begins. Early in the New York trading day, focus will be on Canadian CPI figures and US Retail Sales data, both expected to significantly impact their respective markets. Coupled with ongoing geopolitical news, market participants anticipate notable market movements later in the day.

The post General Market Analysis 16/07/24 first appeared on IC Markets | Official Blog.

The pair is seeing a modest bounce today, up 0.4% to 158.65 currently. There’s not much of a catalyst but it does come amid a rebound off the upwards trendline for this year. So, one can argue on that from a technical standpoint.

After Japan intervened last week, it’s now once again a war of attrition between dip buyers and officials in Tokyo. Who has more resolve and appetite to chase the next move? Can dip buyers keep the trend going or are we going to see a more meaningful break lower?

One key risk event to watch today will be the US retail sales data. With Japan having stepped into the market during a key release in US trading last week, they might feel tempted to do that again to really hammer home their point.

That being said, USD/JPY was trading closer to 162.00 when they intervened last week and we’re now keeping below the supposed 160.00 threshold. But still, it is a potential risk factor to watch out for.

That of course will also depend on what we get from the US retail sales data. A softer report will be what Japan will be hoping for, at least providing them with the option to step in if they would like.

As for European trading today, there won’t be too much to shake things up. There are some decent-sized expiries for USD/JPY at 159.00-35 that could limit the upside before we get to the key risk event later. Besides that, traders will have little to work with in the meantime.

This article was written by Justin Low at www.forexlive.com.

IC Markets Asia Fundamental Forecast | 16 July 2024

What happened in the U.S. session?

Manufacturing conditions remained sluggish in the state of New York as the Empire State Manufacturing Index edged lower from -6 in the previous month to -6.6 in July, marking an eighth straight month of weak business conditions. While orders held steady and shipments edged slightly higher, employment continued to contract and capital spending plans remained weak.

Meanwhile, Federal Reserve Chairman Jerome Powell’s speech at the Economic Club of Washington DC provided subtle clues on upcoming interest rate cuts by the central bank. Powell was tight-lipped on when exactly the Fed would begin its rate-cutting cycle as he focused his attention on the labour market – he stated that “while it’s been appropriate to focus mainly on inflation for a long time, the cooling in the labour market now also warrants the Fed to watch out for an unexpected weakening in the labour market that may also provide a reason for reaction by us”. By paying more attention to the labour side of the Fed’s dual mandate, any further slack in the jobs market could push the Fed to react sooner rather than later with regards to potential rate cuts.

Despite the weak macroeconomic data and Powell’s comments, the dollar index (DXY) stabilized around the threshold of 104 before staging a minor rebound to climb higher towards 104.30 overnight.

What does it mean for the Asia Session?

As Asian markets digest the latest comments by Fed Chairman Jerome Powell, the DXY continued its rebound as it rose towards 104.40 while spot prices for gold retreated from its overnight high of $2,439.78/oz to trade around $2,425/oz. Demand for crude oil remains weak as concerns on a slowing Chinese economy gain traction – WTI oil shed 0.33% yesterday, tumbling under $82 per barrel.

The Dollar Index (DXY)

Key news events today

Retail Sales (12:30 pm GMT)

What can we expect from DXY today?

Retail sales have been mixed over the past three months and the estimate for June points to a decline of 0.3% MoM, which is partly attributed to the tech-related issues suffered by many large auto dealer networks during that period. At an annualized rate, sales have also been slowing – after rising 3.6% YoY in March, sales moderated lower to 2.3% YoY in May. Should sales register a larger-than-anticipated decline, it could function as a near-term bearish catalyst for the dollar.

Central Bank Notes:

• The Federal Funds Rate target range remained unchanged at 5.25% to 5.50% for the seventh meeting in a row.
• The Committee seeks to achieve maximum employment and inflation at the rate of 2% over the longer run and judges that the risks to achieving its employment and inflation goals have moved toward better balance over the past year.
• The economic outlook is uncertain, and the Committee remains highly attentive to inflation risks. Inflation has eased over the past year but remains elevated and in recent months, there has been modest further progress toward the Committee’s 2% inflation objective.
• Recent indicators suggest that economic activity has continued to expand at a solid pace while job gains have remained strong, and the unemployment rate has remained low.
• In considering any adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks and does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2%.
• In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook and would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals.
• In addition, the Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities. Beginning in June, the Committee will slow the pace of decline of its securities holdings by reducing the monthly redemption cap on Treasury securities from $60 billion to $25 billion.
• The Committee will maintain the monthly redemption cap on agency debt and agency mortgage-backed securities at $35 billion and will reinvest any principal payments in excess of this cap into Treasury securities.
• Next meeting runs from 30 to 31 July 2024.

Next 24 Hours Bias

Medium Bullish

Gold (XAU)

Key news events today

Retail Sales (12:30 pm GMT)

What can we expect from Gold today?

Retail sales have been mixed over the past three months and the estimate for June points to a decline of 0.3% MoM, which is partly attributed to the tech-related issues suffered by many large auto dealer networks during that period. At an annualized rate, sales have also been slowing – after rising 3.6% YoY in March, sales moderated lower to 2.3% YoY in May. Should sales register a larger-than-anticipated decline, it could function as a near-term bearish catalyst for the dollar and potentially lift gold later today.

Next 24 Hours Bias

Weak Bullish

The Australian Dollar (AUD)

Key news events today

No major news events.

What can we expect from AUD today?

The Aussie retreated from yesterday’s high of 0.6788 as it slid lower towards 0.6750. This currency pair dipped under 0.6750 as Asian markets came online – these are the support and resistance levels for today.

Support: 0.6715

Resistance: 0.6790

Central Bank Notes:

• The RBA kept the cash rate target unchanged at 4.35%, marking the ninth pause out of the last ten board meetings.
• Over the year to April, the monthly CPI indicator rose by 3.6% in headline terms, and by 4.1% excluding volatile items and holiday travel, which was similar to its pace in December 2023.
• The central forecasts published in May were for inflation to return to the target range of 2–3% in the second half of 2025 and to the midpoint in 2026 while there have been indications that momentum in economic activity is weak, including slow growth in GDP, a rise in the unemployment rate and slower-than-expected wages growth.
• Inflation is easing but has been doing so more slowly than previously expected and it remains high and the Board expects that it will be some time yet before inflation is sustainably in the target range.
• The path of interest rates that will best ensure that inflation returns to target in a reasonable timeframe remains uncertain and the Board is not ruling anything in or out.
• Next meeting is on 6 August 2024.

Next 24 Hours Bias

Medium Bearish

The Kiwi Dollar (NZD)

Key news events today

No major news events.

What can we expect from NZD today?

As demand for the dollar rebounded yesterday, the Kiwi fell under the 0.6100-level. This currency pair was trading around 0.6060 at the beginning of the Asia session – these are the support and resistance levels for today.

Support: 0.6045

Resistance: 0.6130

Central Bank Notes:

• The Monetary Policy Committee kept the OCR unchanged at 5.50% for the eighth meeting in a row and agreed that restrictive monetary policy is reducing domestic demand and consumer price inflation.
• The Committee is confident that inflation will return to within its 1-3% target range over the second half of 2024.
• The decline in inflation reflects receding domestic pricing pressures, as well as lower inflation for goods and services imported into New Zealand while recent monthly Selected Price Indexes suggest weakening in some of the more volatile inflation components, while survey measures of cost pressures and pricing intentions have continued to decline.
• Non-performing bank loans and corporate insolvencies have increased from low levels in line with declining economic activity while bank credit growth also remains very subdued, in line with weakness in the domestic economy and low business and consumer confidence.
• Next meeting is on 14 August 2024.

Next 24 Hours Bias

Medium Bearish

The Japanese Yen (JPY)

Key news events today

No major news events.

What can we expect from JPY today?

Despite last Thursday’s intervention measures by the Bank of Japan (BoJ), the yen continues to remain under pressure as USD/JPY stabilized around 157.70 before staging a minor rebound on Monday. This currency pair was trading around 158.60 as Asian markets came online – these are the support and resistance levels for today.

Support: 157.70

Resistance: 160.30

Central Bank Notes:

• The Bank considers that the policy framework of Quantitative and Qualitative Monetary Easing (QQE) with Yield Curve Control and the negative interest rate policy to date have fulfilled their roles. With the price stability target of 2%, it will conduct monetary policy as appropriate, guiding the short-term interest rate as a primary policy tool.
• The Bank of Japan decided on the following measures:
  1. The Bank will encourage the uncollateralized overnight call rate to remain at around 0 to 0.1% while continuing its Japanese government bonds (JGB) purchases in accordance with the decisions made at the March 2024 MPM.
  2. The Bank decided, by an 8-1 majority vote, that it would reduce its purchase amount of JGBs thereafter to ensure that long-term interest rates would be formed more freely in financial markets.
• Underlying CPI inflation is expected to increase gradually, since it is projected that the output gap will improve and that medium- to long-term inflation expectations will rise with a virtuous cycle between wages and prices continuing to intensify.
• In the second half of the projection period of the April 2024 Outlook for Economic Activity and Prices (Outlook Report), it is likely to be at a level that is generally consistent with the price stability target of 2%.
• The year-on-year rate of increase in the CPI (all items less fresh food), has been in the range of 2.0-2.5% recently, as services prices have continued to rise moderately, reflecting factors such as wage increases, although the effects of a pass-through to consumer prices of cost increases led by the past rise in import prices have waned. Inflation expectations have risen moderately.
• Japan’s economy has recovered moderately, although some weakness has been seen in part while is likely to keep growing at a pace above its potential growth rate, with overseas economies continuing to grow moderately and as a virtuous cycle from income to spending gradually intensifies against the background of factors such as accommodative financial conditions.
• Next meeting is on 31 July 2024.

Next 24 Hours Bias

Medium Bullish

The Euro (EUR)

Key news events today

ZEW Economic Sentiment (9:00 am GMT)

What can we expect from EUR today?

The ZEW Economic Sentiment has improved quite significantly since the fourth quarter of 2023 as June’s reading surged to 51.3, the highest since July 2021. This index was lifted by potential interest rate cuts by the ECB and optimism on lower inflation that could offer an improved environment for the European economy to gain traction. However, July’s estimate of 48.1 points to the first decline in sentiment since last September – a result that could dampen the Euro.

Central Bank Notes:

• The Governing Council today decided to lower the three key ECB interest rates by 25 basis points after nine months of holding rates steady.
• Accordingly, the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will be decreased to 4.25%, 4.50% and 3.75% respectively, with effect from 12 June 2024.
• Since September 2023, inflation has fallen by more than 2.5% and the inflation outlook has improved markedly while underlying inflation has also eased, reinforcing the signs that price pressures have weakened, and inflation expectations have declined at all horizons.
• At the same time, despite the progress over recent quarters, domestic price pressures remain strong as wage growth is elevated, and inflation is likely to stay above target well into next year – the latest Eurosystem staff projections for both headline and core inflation have been revised up for 2024 and 2025 compared with the March projections.
• Projections now show headline inflation averaging 2.5% in 2024, 2.2% in 2025 and 1.9% in 2026 while economic growth is expected to pick up to 0.9% in 2024, 1.4% in 2025 and 1.6% in 2026.
• The Council also confirmed that it will reduce the Eurosystem’s holdings of securities under the pandemic emergency purchase programme (PEPP) by €7.5 billion per month on average over the second half of the year.
• The Council is determined to ensure that inflation returns to its 2% medium-term target in a timely manner and will keep policy rates sufficiently restrictive for as long as necessary to achieve this aim and is not pre-committing to a particular rate path.
• Next meeting is on 18 July 2024.

Next 24 Hours Bias

Weak Bearish

The Swiss Franc (CHF)

Key news events today

No major news events.

What can we expect from CHF today?

Stronger demand for the greenback lifted USD/CHF overnight as it reversed off 0.8935. This currency pair was trading 0.8960 as Asian markets came online – these are the support and resistance levels for today.

Support: 0.8920

Resistance: 0.9000

Central Bank Notes:

• The SNB eased monetary policy by lowering its key policy rate by 25 basis points for the second consecutive meeting, going from 1.50% to 1.25% in June.
• The underlying inflationary pressure has decreased again compared to the previous quarter but inflation had risen slightly since the last monetary policy assessment, and stood at 1.4% in May.
• The inflation forecast puts average annual inflation at 1.3% for 2024, 1.1% for 2025 and 1.0% for 2026, based on the assumption that the SNB policy rate is 1.25% over the entire forecast horizon.
• Swiss GDP growth was moderate in the first quarter of 2024 with the services sector continuing to expand, while manufacturing stagnated.
• Growth is likely to remain moderate in Switzerland in the coming quarters as the SNB anticipates GDP growth of around 1% this year while currently expecting growth of around 1.5% for 2025.
• Next meeting is on 26 September 2024.

Next 24 Hours Bias

Weak Bullish

The Pound (GBP)

Key news events today

No major news events.

What can we expect from GBP today?

Despite stronger demand for the dollar overnight, Cable was resilient as it remained elevated above the level of 1.2650. This currency pair was trading around 1.2965 at the beginning of the Asia session – these are the support and resistance levels for today.

Support: 1.2895

Resistance: 1.3000

Central Bank Notes:

• The Bank of England’s Monetary Policy Committee (MPC) voted by a majority of 7-to-2 to maintain its Official Bank Rate at 5.25% for the seventh consecutive meeting.
• Two members preferred to reduce the Bank Rate by 25 basis points to 5%, an increase of one from the previous meeting.
• Twelve-month CPI inflation fell to 2.0% in May from 3.2% in March, close to the May Monetary Policy Report projection. CPI inflation is expected to rise slightly in the second half of this year, as declines in energy prices last year fall out of the annual comparison.
• Reflecting a margin of slack in the economy, CPI inflation had been projected to be 1.9% in two years’ time and 1.6% in three years.
• UK GDP appears to have grown more strongly than expected during the first half of this year. Business surveys, however, remain consistent with a slower pace of underlying growth, of around 0.25% per quarter.
• UK real GDP had increased by 0.6% in 2024 Q1, 0.2% stronger than had been expected in the May Monetary Policy Report and Bank staff now expect GDP growth of 0.5% in 2024 Q2 as a whole, stronger than the 0.2% rate that had been incorporated in the May Report.
• The MPC remains prepared to adjust monetary policy as warranted by economic data to return inflation to the 2% target sustainably. It will therefore continue to monitor closely indications of persistent inflationary pressures and resilience in the economy as a whole, including a range of measures of the underlying tightness of labour market conditions, wage growth and services price inflation.
• Next meeting is on 1 August 2024.

Next 24 Hours Bias

Weak Bearish

The Canadian Dollar (CAD)

Key news events today

CPI (12:30 GMT)

What can we expect from CAD today?

Inflation in Canada accelerated in May across the various CPI metrics but the latest estimates for June point to a potential stall in prices. Should consumer inflation come in softer than anticipated, the Loonie could face selling pressures which could potentially lift USD/CAD later today.

Central Bank Notes:

• The Bank of Canada reduced its target for the overnight rate by 25 basis points to 4.75% while continuing its policy of balance sheet normalization.
• Canada’s economic growth resumed in the first quarter of 2024 after stalling in the second half of last year. At 1.7%, first-quarter GDP growth was slower than forecast in the MPR but consumption growth was solid at about 3%, and business investment and housing activity also increased.
• Inflation remains above the 2% target and shelter price inflation is high but total CPI inflation has declined consistently over the course of this year, and indicators of underlying inflation increasingly point to a sustained easing.
• CPI inflation has eased from 3.4% in December to 2.7% in April while the preferred measures of core inflation have come down from about 3.5% last December to about 2.75% in April and the 3-month rate of core inflation slowed from about 3.5% in December to under 2% in March and April.
• In the labour market, businesses are continuing to hire workers as employment has been growing, but at a slower pace than the working-age population while elevated wage pressures look to be moderating gradually.
• The Governing Council is closely watching the evolution of core inflation and remains particularly focused on the balance between demand and supply in the economy, inflation expectations, wage growth, and corporate pricing behaviour.
• Recent data has increased the council’s confidence that inflation will continue to move towards the 2% target. Nonetheless, risks to the inflation outlook remain.
• Next meeting is on 24 July 2024.

Next 24 Hours Bias

Medium Bullish

Oil

Key news events today

API Crude Oil Stock (8:30 pm GMT)

What can we expect from Oil today?

Demand for crude oil remains weak as concerns on a slowing Chinese economy gain traction – WTI oil shed 0.33% yesterday, tumbling under $82 per barrel. China’s economy grew much slower than anticipated in the second quarter of this year, as the protracted downturn in the property sector continues to weigh on the economy. Moving over to U.S. inventories, the API stockpiles have signalled stronger demand over the last couple of weeks. Should inventories register a larger-than-expected drawdown once more, it could be the catalyst that markets are looking for prices to finally find a floor.

Next 24 Hours Bias

Medium Bearish

The post IC Markets Asia Fundamental Forecast | 16 July 2024 first appeared on IC Markets | Official Blog.

• ECB speakers Tuesday include Bank of France Governor François Villeroy de Galhau
• Here comes the yen verbal intervention – Hayashi says no comment on FX intervention
• US data focus for Tuesday – June 2024 retail sales – the range of expectations to watch
• Fed’s Kugler is speaking on Tuesday
• PBOC sets USD/ CNY reference rate for today at 7.1328 (vs. estimate at 7.2671)
• Elon Musk plans to commit around US$45 million a month backing Trump
• WSJ: China’s Economy Is in Trouble – Xi Jinping leaving long-running problems to fester
• BlackRock CEO Larry Fink says he was wrong on Bitcoin – now says its legitimate
• US oil industry group (API) warn about trade war backlash if US ramps up tariffs
• Goldman Sachs trim its forecast for China’s 2024 growth a litte, to 4.9% (from 5.0)
• China Plenum continues today – GDP miss yesterday increases calls for stimulus
• US (R) Senator calls on Trump to rethink 60% tariff plan
• BlackRock’s Rieder says “much, much closer to normalcy” – see September Fed rate cut
• Forexlive Americas FX news wrap 15 Jul: “Trump Trade” was in full swing. Yields/stocks up
• Fed’s Daly says she sees a policy adjustment over the coming term
• Trump running mate Vance a supporter of US dollar devaluation – “make it easier to export”
• Spot Ether ETFs are likely to begin trading on Tuesday July 23 (unnamed sources)
• Stocks move toward new lows going into the last 101-15 minutes but bounces into the close.
• Trade ideas thread – Tuesday, 16 July, insightful charts, technical analysis, ideas

It
was a session empty of fresh news and data.

About
the only thing we got was Federal Reserve Bank of San Francisco
President Mary Daly speaking. Daly was in line with other Fed
officials’ comments, saying inflation is getting closer to target
and rate cuts are not too far off. She wasn’t specific on a timeline, unsurprisingly.

USD/JPY
gained ground, grinding up above 158.60. We have had Japan’s
chief cabinet secretary Hayashi with
some verbal intervention, but with little effect.

Now
it looks like we await the US retail sales data for June.

This article was written by Eamonn Sheridan at www.forexlive.com.

Politics is truly a game of inches.

We were an inch away from a very different Monday morning but the bullet missed and now a Florida judge has dismissed Trump’s classified documents case citing violation of the appointments clause. I’m not exactly sure what that clause is but I’m told it will be appealed.

However given the timelines, it’s now highly unlikely to be litigated during the campaign.

This article was written by Adam Button at www.forexlive.com.

Japan chief cabinet secretary Hayashi:

• No comment on forex intervention
• believe forex should reflect fundamentals

USD/JPY has risen during the session. Japanese authorities, Hayashi only at this stage, trying to slow the rise:

This article was written by Eamonn Sheridan at www.forexlive.com.

On Tuesday at 1230 GMT, which is 0830 US Eastern time, we get retail sales for June 2024.

Consensus expectations are in the table below. This snapshot is from the ForexLive economic data calendar, access it here.

• The numbers in the right-most column are the ‘prior’ (previous month/quarter as the case may be) result. The number in the column next to that, where there is a number, is the consensus median expected.

As for the ranges. For Retail sales m/m:

• -0.6% to +0.4%

For Retail sales excl autos m/m:

• -0.3% to +0.3%

***

Why is knowledge of such ranges important?

Data results that fall outside of market low and high expectations tend to move markets more significantly for several reasons:

• Surprise Factor: Markets often price in expectations based on forecasts and previous trends. When data significantly deviates from these expectations, it creates a surprise effect. This can lead to rapid revaluation of assets as investors and traders reassess their positions based on the new information.

• Psychological Impact: Investors and traders are influenced by psychological factors. Extreme data points can evoke strong emotional reactions, leading to overreactions in the market. This can amplify market movements, especially in the short term.

• Risk Reassessment: Unexpected data can lead to a reassessment of risk. If data significantly underperforms or outperforms expectations, it can change the perceived risk of certain investments. For instance, better-than-expected economic data may reduce the perceived risk of investing in equities, leading to a market rally.

• Triggering of Automated Trading: In today’s markets, a significant portion of trading is done by algorithms. These automated systems often have pre-set conditions or thresholds that, when triggered by unexpected data, can lead to large-scale buying or selling.

• Impact on Monetary and Fiscal Policies: Data that is significantly off from expectations can influence the policies of central banks and governments. For example, in the case of the retail sales data due today, weaker than expected will fuel speculation of nearer and larger Federal Open Market Committee (FOMC) rate cuts. A stronger (i.e. higher) sales report will diminish such expectations.

• Liquidity and Market Depth: In some cases, extreme data points can affect market liquidity. If the data is unexpected enough, it might lead to a temporary imbalance in buyers and sellers, causing larger market moves until a new equilibrium is found.

• Chain Reactions and Correlations: Financial markets are interconnected. A significant move in one market or asset class due to unexpected data can lead to correlated moves in other markets, amplifying the overall market impact.

This article was written by Eamonn Sheridan at www.forexlive.com.

• Prior report -6.00
• new orders -0.6 versus -1.0 last month
• prices paid +26.5 versus +24.5 in June
• employment index -7.9 versus -8.7 in June
• 6-month business conditions Index +25.8 versus +30.1 in June (in June it was a two-year high)

Other details:

• shipments 3.9 versus 3.3 last month.
• Prices received 6.1 versus 7.1 last month
• Unfilled orders -11.2 versus 1.0 last month.
• Delivery time -9.2 versus -4.1 last month.
• Inventories -6.1 versus 1.0 last month.
• Prices received 6.1 versus 7.1 last month.
• Average employee work wake -0.1 versus -9.9 last month
• Supply availability is 0.0 versus -1.0 last month

6- month forward details:

• new orders 20.8 versus 30.0 last month.
• Employment 5.8 versus 9.4 last month
• prices paid 39.8 versus 37.8 last month
• prices received 27.6 versus 22.4 last week
• shipments 25.3 versus 28.7 last month

Not much off from expectations or last month on the headline number. Although new orders, prices paid, and employment was higher than last month, employment remained negative as was new orders.

Prices paid/received remained nearer lower levels and close to pre-pandemic levels (see charts below).

This article was written by Greg Michalowski at www.forexlive.com.

The US dollar is a touch stronger almost across the major FX board. AUD and NZD are weak, but its JPY the clear weakest of the majors.

Apart from what has been posted there is no fresh news. The data agenda is basically empty.

USD/JPY hit circa 158.50 and has backed off a few tics:

How we got here:

• Forexlive Americas FX news wrap 15 Jul: “Trump Trade” was in full swing. Yields/stocks up

This article was written by Eamonn Sheridan at www.forexlive.com.

Wall Street Journal info, citing ‘people familiar with the matter’:

• Elon Musk has said he plans to commit around $45 million a month to a new super political action committee backing former President Donald Trump’s presidential run

Trump is getting endorsements from the super-wealthy, keen to not pay taxes.

This article was written by Eamonn Sheridan at www.forexlive.com.