The major assets were all over the place on Thursday, as some assets took a breather from their previous moves while others priced in fresh mid-tier catalysts.
Can you guess which headlines moved the markets in the last trading sessions?
We have the deets!
Headlines:
- Australian dollar eased despite strong December jobs beat
- Germany final CPI Final in December: 0.5% m/m (0.4% forecast; -0.2% previous)
- The U.K. printed a bunch of mid-tier data:
- U.K. Goods Trade Balance: £-19.3B in November (-£17.0B forecast; -£19B previous)
- U.K. GDP MoM: 0.1% in November (0.1% forecast; -0.1% previous)
- U.K. Industrial Production MoM: -0.4% in November (0.2% forecast; -0.6% previous)
- BOE Credit Conditions Survey showed U.K. lenders predict weakening demand for mortgages
- NIESR U.K. GDP estimate: 0.0% for December (0.0% previous)
- Euro Area trade surplus in November: €14.3B (€7.8B forecast; €6.8B previous)
- Canada Housing Starts: 231k in December (240.0k forecast; 262.4k previous)
- U.S. mid-tier reports provided a mixed picture:
- U.S. Retail Sales MoM: 0.4% in December (0.6% forecast; 0.8% previous); Core Retail sales print 0.4% in December (0.4% forecast; 0.2% previous)
- U.S. Philadelphia Fed Manufacturing Index: 44.3 in January (-5.2 forecast; -16.4 previous)
- U.S. NAHB Housing Market Index in January: 47 (45 forecast; 46 previous)
- FOMC member Waller said that rate cuts could be considered in the first half of the year, with three to four cuts possible
- BOC member Toni Gravelle expects the central bank to announce the end of its Quantitative Tightening program “in the first half of this year”
- New Zealand Business NZ PMI: 45.9 (46.8 forecast; 45.5 previous); Employment Index rose to 47.6, its highest since May 2024
Broad Market Price Action:
Dollar Index, Gold, S&P 500, Oil, U.S. 10-yr Yield, Bitcoin Overlay Chart by TradingView
With not a lot of fresh catalysts, the major assets took cues from individual headlines. Global equities were mixed, with European markets gaining traction as luxury goods and mining stocks led the charge. U.S. equities, however, edged lower. The Nasdaq dropped 0.89%, weighed down by Apple’s struggles in China, though Morgan Stanley’s strong earnings provided some support.
Treasury yields fell for the third straight session, with the 10-year yield slipping to 4.600%. Fed Governor Waller’s unexpectedly dovish comments on potential rate cuts drove the decline, even as economic data remained solid.
Retail sales rose 0.4%, and core sales climbed a strong 0.7%, highlighting resilient consumer spending. Weekly jobless claims ticked up to 217,000 but stayed consistent with a healthy labor market. Meanwhile, the Philadelphia Fed manufacturing index surged to its highest level since April 2021.
In commodities, gold continued its bullish run on lower U.S. Treasury yields, climbing to $2,725 and marking its third consecutive winning session. Oil markets told a different story, with WTI sliding to $77.00 as the bullish effects of a brokered ceasefire between Israel and Hamas overshadowed a larger-than-expected U.S. inventories draw and Russian supply sanctions.
Meanwhile, bitcoin dipped to $97,500 in the early U.S. trading before retesting its weekly highs above the key $100,000 mark.
FX Market Behavior: U.S. Dollar vs. Majors:
Overlay of USD vs. Major Currencies Chart by TradingView
The U.S. dollar found some buyers during the Asian session as traders steered clear of “riskier” assets ahead of China’s data dump and the upcoming U.S. retail sales report. USD/JPY was an exception, as it found support from increased talks of a potential Bank of Japan (BOJ) interest rate hike by next week.
In Europe, the British pound faced turbulence following a weaker-than-expected U.K. GDP report. Growth came in at 0.1%, missing the 0.2% forecast. Sterling was on track for further losses, but a broader improvement in risk appetite helped limit the damage.
The real action came during the U.S. session, where retail sales and Fed commentary stole the spotlight. The dollar briefly gained traction after retail sales beat expectations with a 0.4% rise. However, those gains quickly pulled back when Fed Governor Waller surprised markets with dovish comments about potential rate cuts.
By the end of the day, the dollar posted mixed results. It managed modest gains against commodity currencies but took a hit versus the yen as USD/JPY fell below 156.00. Meanwhile, EUR/USD eked out a 0.15% gain after bouncing back from earlier losses.
Upcoming Potential Catalysts on the Economic Calendar:
- U.K. retail sales at 7:00 am GMT
- Euro Area current account at 9:00 am GMT
- Euro Area final core CPI at 10:00 am GMT
- Euro Area final CPI at 10:00 am GMT
- Canada foreign securities purchases at 1:30 pm GMT
- U.S. building permits at 1:30 pm GMT
- U.S. housing starts at 1:30 pm GMT
- U.S. capacity utilization rate at 2:15 pm GMT
- U.S. industrial production at 2:15 pm GMT
- U.K. CB leading index at 2:30 pm GMT
European traders will keep an eye on final Eurozone inflation data and U.K. retail sales, but the real action may come during the U.S. session with housing data and industrial production numbers in focus.
Market sentiment remains cautiously optimistic, though traders could exercise restraint ahead of the U.S. data releases and Monday’s political transition, all while closely monitoring USD/JPY amid growing BOJ rate hike speculation.
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