Market correlations appeared to be out of sync in the latest trading sessions, as crude oil had its own thing going while U.S. equities reacted to earnings data.
Gold advanced more than 1% for the day while BTC/USD cruised to fresh all-time highs at the $73,000 levels.
Which headlines and economic updates are driving price action?
Headlines:
- Japan’s unemployment rate improved from 2.5% to 2.4% (2.5% forecast) in Sept
- German GfK consumer climate improved from -21.0 to -18.3 in October, September reading revised from -21.2
- U.K. BRC shop price index dipped from -0.6% y/y to -0.8% y/y in October; Shop price inflatoin is at its lowest in over three years
- U.K. mortgage approvals rose from 65K to 66K (65K expected) in September; Net individual lending dipped from 4.2B GBP to 3.8B GBP (4.1B GBP expected)
- Iranian revolutionary guards threaten to deliver more “crushing” strikes to Israel in coming days
- U.S. government shared plans to buy up to 3M barrels of oil to help replenish the Strategic Petroleum Reserve for delivery through May 2025
- U.S. S&P/Case-Shiller Home Price Index for August 2024: -0.3% m/m (-0.1% m/m forecast; 0.0% m/m previous)
- U.S. goods trade deficit widened from $94.2B to $108.2B in September ($95.9B shortfall expected) as exports fell $3.6B from the previous month while imports rose $10.4B
- U.S. JOLTS Job Openings for September: 7.44M (7.8M forecast; 7.86M previous)
- U.S. Conference Board Consumer Confidence index for October: 108.7 (98.5 forecast; 99.2 previous)
- SNB Governing Board Chairman Schlegel noted that the central bank could cut interest rates in the coming quarters
- U.S. API private inventories fell 0.57M barrels vs. estimated increase of 2.3M barrels
Broad Market Price Action:
Dollar Index, Gold, S&P 500, Oil, U.S. 10-yr Yield, Bitcoin Overlay Chart by TradingView
Price action among higher-yielding assets diverged early in the Asian session, as WTI crude oil carried on with its slump on strengthening expectations of a potential ceasefire in Gaza further dampening global supply concerns.
Meanwhile, gold and bitcoin surged from the get-go and sustained their upward trajectory throughout the day, as investors appear to be seeking higher returns compared to the usual safe-haven options. The energy commodity eventually pulled higher at the start of the London session likely on elevated geopolitical tensions, as Iran threatened to deliver “more crushing” strikes on Israel in retaliation.
Treasury yields also advanced, with 10-year yields up to new highs at 4.34%, before unwinding its gains when the U.S. dollar was bogged down by a downbeat jobs report.
U.S. equities appeared to be off to a nervous start but eventually ended the day in the green, with the Nasdaq closing at record highs, thanks mostly to positive earnings data from Alphabet and Visa.
FX Market Behavior: U.S. Dollar vs. Majors:
Overlay of USD vs. Major Currencies Chart by TradingView
Volatility was elevated for major currency pairs during the Asian trading session, as the Japanese yen drew some support from a better-than-expected unemployment rate early on while the Aussie and Kiwi took hits from risk-off flows.
As it turned out, a Reuters report revealed China’s plans for 10 trillion yuan in stimulus but that these funds will be spread out over three years and used mainly to clean up local government debt and buy up stagnant properties.
Germany reported stronger than expected consumer confidence data for September, as the reading rose from an upgraded -21.0 figure to -18.3 during the month versus the -20.4 consensus, providing a bit of support for the shared currency.
However, dollar strength soon picked up against majority of its peers (except against GBP which was lifted by positive U.K. budget expectations) a few hours into the London session, as safe-haven demand returned.
The U.S. currency soon gave back most of these gains when the JOLTS job openings report came in weaker than expected, leading traders to adjust NFP expectations, brushing off the upside surprise in the CB consumer confidence index.
Upcoming Potential Catalysts on the Economic Calendar:
- German preliminary CPI coming up
- U.K. Autumn Forecast Budget Statement coming up
- French consumer spending and flash quarterly GDP at 6:30 am GMT
- Swiss KOF economic barometer at 8:00 am GMT
- Spanish flash CPI and GDP at 8:00 am GMT
- SNB Governing Board Chairman Schlegel’s testimony at 9:00 am GMT
- Eurozone preliminary GDP at 10:00 am GMT
- U.S. ADP non-farm employment change at 12:30 pm GMT
- U.S. advance GDP at 12:30 pm GMT
- U.S. pending home sales at 2:00 pm GMT
- U.S. EIA crude oil inventories at 2:30 pm GMT
- BOC Governor Macklem’s speech at 8:15 pm GMT
There’s no shortage of top-tier catalysts for today, as volatility could pick up during the London session with the release of preliminary CPI and GDP readings from eurozone economies, as well as the highly-anticipated U.K. budget statement.
Later on, the focus could shift back to U.S. fundamentals, as the ADP non-farm employment change report will likely provide more NFP clues while the advance GDP reading for Q3 could shake things up as well.
As always, keep an eye out for headlines that impact overall market sentiment, and don’t forget to check out our brand new Forex Correlation Calculator!