Market price action was mixed at the start of the week, as some traders stood on the sidelines ahead of this week’s data releases while others priced in the increased tensions in the Middle East.

Which of your closely watched assets saw increased volatility and directional price action?

We’re breaking them down today:

Headlines:

• RBA Deputy Gov. Andrew Hauser supported a more flexible approach to policymaking, where decisions are based on different scenarios than rigid forecasts
• Germany wholesale price index rose by 0.3% m/m in July after a 0.3% decline in June (0.2% expected)
• Canada building permits fell by another 13.7% m/m in June after a 12.7% decline in May
• Cleveland Fed inflation expectations eased from 3.8% y/y to 3.4% y/y in Q3 2024
• U.S. budget deficit ballooned from $66.0B in June to $243.7B in July as outlays (+16%) outpaced deferred tax receipts (+12%)
• New Zealand visitor arrivals dipped by 0.2% m/m in June following a 4.0% increase in May
• Japan producer price inflation accelerated from 2.9% y/y to 3.0% y/y in July

Broad Market Price Action:

Dollar Index, Gold, S&P 500, Oil, U.S. 10-yr Yield, Bitcoin Overlay Chart by TradingView

A bank holiday in Japan kept things pretty quiet during the Asian trading session, and with no major data releases and some caution ahead of this week’s key events, that calm extended into European markets as well.

Oil prices saw a bit more movement, climbing from $76.75 to $80.00, largely driven by rising tensions in the Middle East. There’s talk that Iran might be gearing up to attack Israel, which could explain why the U.S. sent a guided missile submarine and sped up the deployment of the Abraham Lincoln carrier group to the area. That said, the gains were somewhat limited after OPEC lowered its 2024 demand forecasts due to a weaker outlook for China.

Over in the U.S., gold prices also ticked up, moving from $2,425 to $2,470, while U.S. 10-year Treasury yields dipped below 3.9%. This drop might be due to growing expectations that this week’s U.S. inflation reports could stoke talks of a Fed rate cut.

FX Market Behavior: U.S. Dollar vs. Majors:

Overlay of USD vs. Major Currencies Chart by TradingView

The U.S. dollar had a mixed day in the markets, slipping against “riskier” currencies while holding onto its gains against other safe havens like the Japanese yen and Swiss franc. The Greenback’s weakness against higher-risk assets may be tied to the drop in U.S. 10-year Treasury yields, along with some profit-taking ahead of this week’s key U.S. data releases.

Commodities-linked currencies like the AUD and NZD started the week on a strong note, benefiting from a bounce back from last week’s risk aversion and global growth worries. Traders also seem to be positioning ahead of the Reserve Bank of New Zealand (RBNZ) policy decision and a big batch of U.K. economic data, which likely contributed to NZD and GBP’s gains.

Upcoming Potential Catalysts on the Economic Calendar:

• U.K. labor market data at 6:00 am GMT
• Japan preliminary machine tool orders at 6:00 am GMT
• German ZEW economic sentiment at 9:00 am GMT
• U.S. NFIB small business index at 10:00 am GMT
• U.S. PPI reports at 12:30 pm GMT
• FOMC member Bostic to give a speech at 5:15 pm GMT
• RBNZ policy decision at 2:00 am GMT (Aug 14)

News traders have a busier day ahead, starting with the U.K.’s labor market numbers that may or may not encourage Bank of England (BOE) interest rate cut speculations.

Much later today, the Reserve Bank of New Zealand (RBNZ) will be under the spotlight. While the markets see the central bank maintaining its 5.50% interest rates, RBNZ’s quarterly projections and presser could encourage increased volatility for the major NZD pairs.