The JPY is the strongest and the USD is the weakest as the NA session begins.

The JPY is the strongest and the USD is the weakest as the NA session begins.

Yesterday, the FOMC minutes were released. Recall, the Federal Reserve raised interest rates to their highest in 22 years during their July meeting. However, minutes from the meeting reveal internal disagreements over this decision. While the Fed’s main goal is to reduce inflation to a 2% target without harming the economy, there’s debate on how to achieve this. Many officials expressed concerns about ongoing inflationary pressures, but some were hesitant about further policy tightening. A few even suggested not increasing borrowing costs. Despite the discussions, the rate was raised by 25 basis points unanimously. The minutes suggest the Fed might be more careful about future rate hikes, emphasizing the importance of upcoming economic data.

Overnight, on the economic data front, Australian employment was weaker than expected. The price of the AUDUSD fell and tested support on the daily chart and bounced (see post yesterday targeting that support level HERE). The price still is below the low from the end of May at 0.64567. Getting above that level would give the dip buyers more confidence of a bounce higher from here.

A summary of the economic releases overnight:

  • NZD PPI Input q/q: Actual -0.2% vs. Forecast 0.4% vs. Prior 0.0% – WEAKER
  • NZD PPI Output q/q: Actual 0.2% vs. Forecast 0.8% vs. Prior 0.2% – WEAKER
  • JPY Core Machinery Orders m/m: Actual 2.7% vs. Forecast 3.6% vs. Prior -7.6% – WEAKER
  • JPY Trade Balance: Actual -0.56T vs. Forecast -0.44T vs. Prior -0.54T – WEAKER
  • JPY Tertiary Industry Activity m/m : Actual -0.4% vs. Forecast -0.1% vs. Prior 1.0% – WEAKER
  • AUD Employment Change: Actual -14.6K vs. Forecast 14.6K vs. Prior 31.6K – WEAKER
  • AUD Unemployment Rate: Actual 3.7% vs. Forecast 3.6% vs. Prior 3.5% – WEAKER
  • EUR Trade Balance : Actual 12.5B vs. Forecast 3.8B vs. Prior 0.2B – STRONGER

Fitch was at it again. In an interview with Bloomberg TV, Fitch’s James McCormack mentioned that if China introduces more stimulus measures, the agency might reconsider the rating, especially given China’s high debt-to-GDP ratio. While Fitch doesn’t currently plan to alter the rating, which has been stable since 2007, there’s evident uncertainty. China’s post-pandemic economic recovery has been sluggish, and concerns remain about its property sector. Last week Fitch downgraded the U.S. long-term credit rating from AAA to AA+ and hinted at potential downgrades for several American banks. Needless to say there seems to be a pivot. Expect more from ratings agencies (and rightfully so).

A snapshot of the markets as the NA session gets underway shows:

  • Crude oil is trading up $0.71 or 0.88% $80.08. There are concerns that a slowdown in China’s growth and a possible stringent policy from the Fed might reduce fuel demand in the two largest global economies. Furthermore, the Energy Information Administration reported that U.S. oil production reached a three-year peak last week, nearing the record levels seen before the 2020 COVID-19 outbreak.
  • Spot gold is trading up $6.78 or 0.36% at $1898.70 after falling to the lowest level since March 15 yesterday
  • Spot silver is trading up $0.34 or 1.55% at $22.34
  • Bitcoin is trading at $28503. At this time yesterday the price was at $29,127.

In the US premarket for US stocks, major indices are trading higher after the sharp falls of over 1% in the Nasdaq index yesterday (for the 2nd consecutive day). Walmart announced better-than-expected earnings this morning.

For Walmart

  • earnings-per-share came in at $1.84 versus $1.71 expected.
  • Revenues were also better at $161.63 billion versus $160.27 billion.
  • They also adjusted forward earnings-per-share and net sales for 2024.
  • The stock is up around 0.94% in premarket trading

The snapshot of the major indices shows:

  • Dow Industrial Average is trading up 40 points after yesterday’s -180.65 point decline
  • S&P index is trading up 9.8 points after yesterday’s minus 33.53.2 point
  • NASDAQ index is trading up 41 points after yesterday’s -156.42 point decline

In the European equity markets, the major indices are trading down

  • German DAX, -0.11%
  • France’s CAC, -0.08%
  • UK’s FTSE 100, -0.25%
  • Spain’s Ibex, -0.09%
  • Italy’s FTSE MIB, down -0.15% (delayed)

In the Asian Pacific today, equity markets closed mixed

  • Japan’s Nikkei 225, down -0.44%
  • China’s Shanghai Composite, up 0.42%
  • Hong Kong’s Hang Seng, down -0.01%
  • Australia’s S&P/ASX 200, down -0.68%

In the US debt market, yields are mixed. The shorter and today is higher while the longer and is modestly lower

  • 2-year yield, 4.939% -4.0 basis points
  • 5-year yield, 4.403%, -0.5 basis points
  • 10-year yield, 4.286%, +3.0 basis points
  • 30-year yield, 4.310% -0.8 basis points

In the European debt market, benchmark 10-year yields are mostly higher:

This article was written by Greg Michalowski at Source