TOKYO – Currency and Market Update
The US dollar slipped below its recent high on Thursday, while European stock markets remained largely unchanged.
Central bankers globally are gearing up for an event that kicks off later today. A significant aspect of this will be Fed Chairman Jerome Powell’s address on Friday. Traders are keenly assessing the chances of interest rate cuts in September.
The Pan-European Stoxx 600 index and Germany’s DAX opened steady. The UK’s FTSE 100 saw a modest increase of 0.1%, but the French CAC 40 dipped by 0.1%.
Michael Brown, a senior research strategist at Pepperstone, shared his thoughts, saying, “I’m a dip buyer and see this recent setback as just another example of bubbles being diminished in the market.” He added, “Strong growth and a milder trade atmosphere generally favor a high path of least resistance, potentially aided by the Fed’s easing.”
Despite some fluctuations, the momentum in the stock market has remained robust. Australian benchmarks reported a 0.9% gain, while other Asian indexes have seen some losses but remain near their recent peaks.
Japan’s market, which hit a record high just a couple of days ago, fell by 0.6%. However, Korea’s Kospi rebounded by 0.7%, bouncing back from a six-week low on Wednesday but still close to its four-year high from July 31.
Nasdaq futures showed slight improvement, indicating a 0.7% decline in the Nasdaq composite overnight. S&P 500 futures remained unchanged after the cash index dipped by 0.2%.
Chairman Powell has expressed hesitance regarding interest rate cuts, especially given the tariff-induced price pressures anticipated this summer.
Earlier this month, traders felt more optimistic after a weaker wage report bolstered speculation about cuts in September, as consumer price data suggested limited inflationary impacts from tariffs.
However, a recent rise in producer prices complicates the picture for policymakers.
Following the Fed’s meeting in July, where they opted to maintain rates, it appears that some committee members are pushing for reductions.
This shift has led traders to adjust their expectations for a September rate cut to 80%, down from 84% just a day prior, with projections indicating a total of 53 basis points of cuts for the year.
The dollar index on Thursday was stabilizing at 98.33 after peaking at 98.441 the previous day, its highest since August 12.
U.S. two-year Treasury yields, sensitive to changes in monetary policy expectations, climbed 1.2 basis points to 3.756%. Meanwhile, the 10-year yield edged up 0.8 basis points to 4.304%.
In Japan, bond yields have also risen, with 20-year yields reaching 2.655%, the highest since late 1999, and 10-year yields rising to 1.610%, a peak since October 2008. Investors are cautious about increasing fiscal spending amidst calls for the Japanese prime minister to resign.
The dollar traded at 147.58 yen, down by 0.2%.
Both the euro and the pound remained stable at $1.1641 and $1.3446, respectively.
Gold prices eased by 0.3%, hovering around $3,338 per ounce.
On the oil front, a larger-than-expected draw in U.S. crude inventories fueled a rise in prices, underscoring expectations for consistent demand.
Brent crude futures gained 0.9% to a barrel, building off a 1.6% increase in the previous session. U.S. West Texas Intermediate (WTI) crude oil futures rose 1.1% to $63.37, following a 1.4% uptick on Wednesday.
