The RBNZ took the spotlight early in the day with a surprise rate cut, but data releases from the U.K. and the U.S. soon drew attention to other market themes.

How did your favorite assets trade on Wednesday?

Let’s discuss the major headlines:

Headlines:

• RBNZ surprised the markets with a 25bps rate cut and hinted at further interest rate reductions
• Japan PM Fumio Kishida announced that he won’t be seeking re-election as leader of the ruling Liberal Democratic Party this September
• U.K. inflation rose from 2.0% y/y to 2.2% y/y, its first acceleration since December; Core CPI eased from 3.5% to 3.3% (3.4% expected)
• U.K. PPI input prices for July: -0.1% m/m (-0.3% expected, -0.4% previous); PPI output steadied (0.1% expected, -0.7% previous)
• Euro Area GDP maintained its 0.3% q/q growth as expected in Q2 2024
• Euro Area employment change ticked 0.2% q/q higher in Q2 2024 after a 0.3% uptick in Q1
• U.S. CPI accelerated from -0.1% m/m to 0.2% m/m in July; Core CPI increased by 0.2% m/m as expected (0.1% previous); Annual inflation eased from 3.0% y/y to 2.9%
• EIA crude oil inventories reflected a 1.4M-barrel increase in the week ending August 9, higher than the expected 1.9M-barrel draw and 3.7M-barrel decrease in the previous week
• Japan preliminary GDP rose from -0.5% to 0.8% (0.6% expected) in Q2 2024

Broad Market Price Action:

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

Most major assets traded within ranges during the Asian and early European sessions, but there were some bursts of volatility during key data releases.

For instance, spot gold and U.S. crude oil prices briefly dipped after the RBNZ unexpectedly cut interest rates and suggested this was just the “first step” in an easing cycle. Risk sentiment took a hit as well after Japan’s Prime Minister announced he wouldn’t be running in the September elections, adding a layer of uncertainty to the mix.

Things got more volatile during the European session. U.S. oil prices extended their intraweek downtrend, likely driven by mounting global growth concerns and chatter about ceasefire talks between Hamas and Israel. In the U.S., slightly cooler inflation data fueled speculation about a potential Fed rate cut, which likely helped push U.S. stocks higher and drove the 10-year Treasury yields down to around 3.81%.

The U.S. dollar, which initially dropped following the CPI report, eventually reversed course and likely put pressure on other currencies. Gold prices slipped to $2,440, bitcoin (BTC/USD) tumbled from $61,800 to around $59,000, and WTI crude ended the day near $77.00 after hitting highs close to $79.00.

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

Overlay of USD vs. Major Currencies Chart by TradingView

The New Zealand dollar and Japanese yen grabbed the spotlight early in the day. The NZD was dragged down by a surprise interest rate cut from the RBNZ and hints of more easing to come. Meanwhile, JPY took a hit in late Asian session trading after news broke that Japan’s Prime Minister won’t be seeking re-election in September.

In early European trading, the U.S. dollar edged lower against its European counterparts, likely due to some profit-taking ahead of the U.S. CPI release.

The inflation report, which showed cooler-than-expected numbers for July, fueled talks of a Fed rate cut and pushed the dollar lower for about an hour after the release. However, the Greenback eventually clawed back those losses, possibly because many traders had already anticipated weaker readings after Tuesday’s soft U.S. PPI data. By the end of the day, the dollar edged higher and finished close to where it opened.

Upcoming Potential Catalysts on the Economic Calendar:

• China industrial production, retail sales, fixed asset investment, and unemployment rate at 2:00 am GMT
• Japan revised industrial production at 4:30 am GMT
• U.K. preliminary GDP at 6:00 am GMT
• U.K. goods trade balance at 6:00 am GMT
• U.K. industrial production at 6:00 am GMT
• U.K. manufacturing production at 6:00 am GMT
• Canada wholesale sales at 12:30 pm GMT
• U.S. retail sales at 12:30 pm GMT
• U.S. Empire State manufacturing index at 12:30 pm GMT
• U.S. Philly Fed manufacturing index at 12:30 pm GMT
• U.S. industrial production at 1:15 pm GMT
• U.S. NAHB housing market index at 2:00 pm GMT
• Australia CB leading index at 2:30 pm GMT
• BusinessNZ manufacturing index at 10:30 pm GMT
• New Zealand PPI reports at 10:45 pm GMT

Market players are in for another round of top-tier data releases, this time starting with China’s data dump during the Asian session.

The U.K. will also publish its preliminary GDP readings and industrial production, followed by retail sales numbers and a couple of manufacturing data from the U.S.

While the reports may not inspire broad-based and sustained market reactions on their own, these reports may affect their individual currencies and overall risk sentiment. Make sure you’re glued to the tube so you don’t miss any potential catalysts!