Articles

• China data this weekend: Will housing prices show signs of stabilization?
• Former New York Fed President Dudley sees a strong case for 50bp interest rate cut
• Pricing for a 50bp FOMC rate cut has firmed in just a few hours, 41% now
• China’s 10 year government bond yield has fallen to a record low of 2.0775%
• Fitch are forecasting a Bank of Japan rates to 1% (by the end of 2026!)
• PBOC sets USD/ CNY reference rate for today at 7.1030 (vs. estimate at 7.1048)
• Gold hit a record high price in Asia trade, above US$2562.65
• Putin warns that lifting Ukraine missile restrictions will put NATO at war with Russia
• Critical data coming for AUD/USD … this weekend! (Spoiler – China data)
• Goldman Sachs see a Bank of England rate cut in November, with a cascade of cuts to follow
• Bank of England to pause rate cuts next week – survey result unanimous
• Peru’s central bank cuts reference rate by 25bps to 5.25%, as expected
• Reports that China set to cut interest rates on more than $5 trln of outstanding mortgages
• New Zealand August Manufacturing PMI 45.8 (prior 44.4)
• Deutsche Bank on what makes this ECB rate cut cycle unusual
• El Erian says “ton of cash” on the sideline helping to limit losses in global bonds
• Wall Street Journal Fed watcher asks on FOMC rate cut next week – Start small or big?
• Forexlive Americas FX news wrap 12 Sep: ECB cuts rates as expected, but the USD falls
• Interactive Brokers will launch US election betting next week
• PIMCO sees US dollar volatility ahead after the Fed begins cutting
• Broader US stock indices up for the fourth consecutive day
• Trade ideas thread – Friday, 13 September, insightful charts, technical analysis, ideas

There
was a sharp surge in pricing for a 50bp Federal Open Market Committee
(FOMC) rate cut at next week’s meeting during the time zone here
today. This helped to lower the US dollar. EUR/USD rose above 1.1090.
Gold rose to a record high above US$2,570.

USD/JPY
was where the main action was though, dropping back towards the lows
of earlier this week. We didn’t have data or news out of Japan.

News
and data flow was light otherwise. I did post on Russia’s Putin
warning the UK and US that they will be at war with Russia if they
allow Ukraine to use long-range missiles to strike targets across the
border. Also, a former New York Federal Reserve President, Bill
Dudley, said he sees a strong case for a 50bp FOMC rate cut at the
September 18 meeting. Dudley had previously called for a cut at the
July meeting.

Coming
up over the weekend we have key economic data published in China, see
bullets above for more on this.

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

I posted earlier on the data coming from China this weekend:

• Critical data coming for AUD/USD … this weekend! (Spoiler – China data)

All of the three major indicators are expected to show slower growth than they did in July.

Via ING, more:

• We are generally looking for another month of sluggish growth data this month, with the three big economic activity indicators of industrial production (5.1% prior, 4.8% forecast), fixed asset investment (3.6% prior, 3.5% forecast), and retail sales (2.7% prior, 2.5% forecast) all expected to moderate.
• The housing price data will also be scrutinised closely for signs of stabilisation.

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

US Markets Drive Higher Ahead of Fed – Nasdaq Up 1%

US stock markets pushed higher once again in trading yesterday, as investors remained unfazed by the expected rate cut from the Federal Reserve. Meanwhile, gold reached new historic highs. The Dow gained 0.58% on the day, trailing the more tech-focused S&P and Nasdaq, which closed the session up 0.75% and 1%, respectively. Treasury yields crept up but stayed near recent lows, with the 2-year yield rising 0.4 basis points to 3.649% and the 10-year adding 2.6 basis points to 4.681%. The dollar took a hit, losing 0.52% on the day, as the euro rallied despite a 25-basis-point cut from the ECB. Oil prices also edged higher, with Brent up 2.21% to $72.17 and WTI up 2.72% to $69.14, as traders monitored Tropical Storm Francine in the Gulf of Mexico. The standout move came in gold, which surged to a fresh all-time high of $2,560 and saw a further uptick in early Asian trading, reaching another new peak at $2,562.66.

Markets Realigning Ahead of the Fed

Global financial markets are undergoing a degree of realignment ahead of next week’s Federal Reserve meeting, with some moves catching investors off-guard. The dollar saw significant selling pressure yesterday, despite recent data prints from the US coming in stronger than expected. Both the CPI and PPI figures marginally exceeded forecasts, yet the greenback faced heavy selling in yesterday’s trading session. Some of the move can be attributed to a more hawkish-than-expected ECB following their rate cut, which spurred a strong rally in the euro. Meanwhile, the surge in gold appeared to clear out weaker stops just above the previous all-time high. From a dollar perspective, the market is now pricing in a smaller 25-basis-point cut next week, which has led to the unexpected dollar sell-off. Traders are now bracing for increased volatility in the final few trading sessions this week and early next week, ahead of Wednesday’s key Fed announcement.

Quiet Calendar Day Ahead, but Volatility Expected

The macroeconomic calendar is relatively light for today’s trading sessions, though traders are anticipating further market moves after a busy few days. Potential rate updates from China will keep market participants alert during the Asian session, as they continue to digest the overnight moves from the US. The London session is expected to be quieter, with only lower-tier data scheduled for release. However, more market activity is anticipated later in the day, as New York re-enters the fray. The Preliminary Michigan Consumer Sentiment and Inflation Expectations reports are due for release and will offer some insight into the general market mood, but most expect to see flow-driven moves later today. Traders will also keep an eye on China’s large data drop over the weekend, which includes key figures on Industrial Production and Retail Sales. Any sharp deviations from estimates could trigger volatility at Monday’s open.

The post General Market Analysis – 13/09/24 first appeared on IC Markets | Official Blog.

What a trend for gold.

I posted this geopol stuff earlier, if this isn’t a good case for gold I don;t know what is:

• Putin warns that lifting Ukraine missile restrictions will put NATO at war with Russia

Apart from that gold has plenty going for it, has for a long time:

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

The UK and the US meet on Friday to discuss plans to allow Kyiv to strike targets inside Russia with Western-supplied missiles.

Russian President Vladimir Putin warned he would regard such an agreement as tantamount to NATO directly entering the war.

• “This will mean that NATO countries, the United States, and European countries are fighting Russia”

Via Politico:

• Military experts argue any guidelines agreed for the British weapons at the two-hour summit in Washington could also then pave the way for the Ukrainians to fire U.S.-supplied ATACMS — a tactical ballistic missile system — at airfields and army bases deep inside in Russia.
• Kremlin spokesperson Dmitry Peskov suggested the meeting between Starmer and Biden was a mere formality and that a deal had already been done, vowing Russia’s reponse “will be appropriate.”

More at that link above.

If this is going to be added geopolitical risk markets are so far shrugging it off.

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

Updating USD/JPY in the abscense of any news nor data out of Japan. Just continued JPY volatility (buying really!).

We visited under 141.00 eaeleir this week on BoJ comments:

• ForexLive Asia-Pacific FX news wrap: Yen hit an eight month high on BOJ comments

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

Via Westpac on the Australian dollar:

• AUD/USD is showing some tentative signs of shaking off its lacklustre
  price action linked to iron ore prices hitting 22mth lows and rocky
  global market conditions.
• But AUD must still navigate August China
  activity data this weekend. August China imports, PMIs and recent credit
  trends, anecdotally, do not auger well for the August data round.

That’s right folks – Chinese August ‘activity’ data is due on Saturday, September 14, 2024:

• at 0200 GMT, which is 2200 on Friday evening US Eastern time

All three of these 3 key indicators:

• retail sales, industrial output, investment

are expected to come in at lower rates of growth than they did in July.

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

NZ – BusinessNZ Performance of Manufacturing Index (PMI).

Still in contraction at 45.8

• prior revised to 44 .4, from 44.0
• long term average is 52.6
• has been in contraction for 18 consecutive months

BusinessNZ’s Director, Advocacy Catherine Beard:

• sub-index results for Production (46.3) and New Orders (46.8) were both the strongest they have been in a few months

BNZ’s Senior Economist Doug Steel:

• “while business confidence and building consent indicators have ticked up from their very low levels offering potential for improvement over the coming 12 months, the PMI is an indicator of outcomes and continues to show that current conditions remain challenging”

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

Mohamed El-Erian spoke with Bloomberg Television on the global bond market:

• sale of $39 billion 10-year US Treasury notes Wednesday had “massive indirect demand”

• “I can only reconcile it by the ton of cash that’s on the sideline, and the fear that if you don’t lock in interest rates now, you will lose interest income in the future. Every time we have a backup in rates, we have people rush back in.”

• Recent price action in Treasuries is fueled in part by “money on the sideline being put to work quickly,”

Adam wrote on locking in high a rate fixed income investment way, way back in the first week of July:

• I believe this is a rare moment to lock in investments with high rates for a long duration

Good to see folks are catching up.

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

• Broader US stock indices up for the fourth consecutive day
• CPI and PPI data point to a tame ore PCE next month
• Was the CItigroup trader the best trader in the world? He thinks so.
• WSJ Timiraos: Fed has a rate cut dilemma. Go big or go small
• Reuters IPSOS poll: Harris 47%. Trump 42%
• US Treasury auctions off $58 billion of 30 year bonds at a high yield of 4.015%
• US household net worth rose to record $163.8 trillion in Q2 2024
• ECB sources: ECB officials have not ruled a rate cut at the October meeting, but…
• Higher close for European major indices
• US August budget deficit -$380 billion versus estimate -$317.3 billion deficit
• Gold is precious in the eyes of investors. The precious metal breaks to new all-time highs
• Kickstart the FX trading day for Sept 12 w/a technical look at the EURUSD, USDJPY & GBPUSD
• Tech stocks wobble: Communication services shine while energy holds steady
• Highlights of the ECB press conference for September 2024
• Canada Building permits for July 22.1% vs 7.1% estimate
• US PPI final demand MoM for August YoY 1.7% vs 1.8% estimate. MoM 0.2% vs 0.1% est.
• US weekly initial jobless claims 230K vs 230K expected
• Comparing the ECB August statement to the September statement
• ECB cuts deposit rate by 25 bps in September monetary policy decision, as expected
• The AUD is the strongest and the CHF is the weakest as the NA session begins
• ForexLive European FX news wrap: Light movements ahead of ECB decision, more US data

The US PPI came in mixed today. The initial jobless claims came in as expected. The combination initially did not change perceptions that the Fed will likely cut rates by 25 basis points.

Later there were a couple posts by WSJ Timiraos. The first talked to the dilemma that the Fed is facing. Do they go small or do they go big (ie.25 or 50 bps cut).That gave the market more hope that the Fed may still go big with a 50 basis point cut. There was another tweet where the number crunchers of CPI and PPI, project core PCE to be in the 0.13% to 0.17% range. That would keep the bias moving lower for inflation.

The news helped to push the USD lower not only on the data but also due to risk-on sentiment.

The clear focus , nevertheless, remains on the Federal Reserve’s potential rate cut next week, and the market is still pricing in a 25% chance of a 50 basis point cut. Remember as well, the dot plot and the updated GDP, inflation and employment estimates from Fed officials will also be presented as focus moves more into 2025 as well. What will the dot plot project?

Looking at the strongest to the weakest of the major currencies, the Australian Dollar (AUD), New Zealand Dollar (NZD), and British Pound (GBP) outperformed, benefiting from the risk-on trade and the USD weakness.

The AUDUSD extended above its 200 hour MA at 0.6700 and looks toward the 100 bar MA on the 4-hour chart at 0.6734. The NZDUSD also extended above its 200 hour MA at 0.6175 and looks toward its 100 bar moving average only 4-hour chart and 0.61936. GBPUSD moved above its 200 hour MA at 1.3110.

Conversely, the Canadian Dollar (CAD) underperformed closing near unchanged on the day and is testing its 100-hour MA at 1.35779 after holding support near that MA earlier in the day and moving higher. The new trading day will use that MA as a risk defining level. Move below would be more bearish. Stay above would be more bullish. .

The EURUSD also moved higher- extending above its 200-hour MA at 1.1056 in the process. The European Central Bank (ECB) cut rates as expected, but President Lagarde did not commit to a specific future rate path. Inflation projections were revised slightly higher for 2024 and 2025, while growth forecasts were slightly downgraded. Later in the day, “ECB sources” implied that October cut is likely not on the table and that December needed more weak growth to prompt the ECB to cut rates. That also seemed to give the EURUSD a bid into the close. The price is above its 200 hour MA at 1.1056. Stay above would be more bullish.

The broader Nasdaq and S&P indices closed higher for the 4th consecutive day this week and have reversed most of the -5.77% and -4.25% declines from last week.

US yields rose by two – three basis points. The 30 year bond auction did not go as well as the 3 and 10 year auctions on Tuesday and Wednesday, although there was still fairly strong international demand:

• 2-year yield 3.645%, unchanged
• 5year yield 3.467%, +2.1 basis points
• 10 year yield 3.677%, +2.5 basis points
• 30 year yield 3.990%, +2.8 basis points.

Gold prices soared and closed at a record level. The price of Spot gold rose $47.60 or or .0% had 2558.83. Silver is up $1.21 or 4.22% at $21.85. Bitcoin also rose by $892 or $58,232.

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

There are venues for betting on the US election but this is seen as a big deal because IB has around 3 million customers.

IB will open betting from Monday, September 16.

• bets on Trump or Harris
• also bets on swing-state Senate races

Info via Wall Street Journal (gated)

–

In other political news, Trump has said he won’t debate Harris again.

Harris had been pushing for another debate:

• I believe we owe it to the voters to have another debate, because this election and what is at stake could not be more important

Trump says No.

–

The election is still weeks away. Plenty more boring election news to come until then.

While we wait, a bit of a laugh:

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

After a sharp declines last week when they NASDAQ index fell by -5.77% and the S&P fell by -4.25%, each of those indices are up for four consecutive days this week.

The NASDAQ index is now up 5.27%, while the S&P index as rebounded by 3.46% this week.

Looking at the major indices today:

• Dow industrial average +235.06 points or 0.58% at 41096.77
• S&P index of 41.63 points or 0.75% at 5595.76.
• NASDAQ index up 174.15 points or 1.00% at 17569.68

The small-cap Russell 2000 rose 25.58 points or 1.22% at 2129.42.

• Nvidia rose by 1.91%
• Dell rose by 3.08%
• Meta rose by 2.69%
• Amzaon rose by 1.34%
• Alphabet rose by 2.34%
• Microsoft rose by 0.94%

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