The markets took a step back from pricing in their recession fears, leading to upticks for a lot of the major assets on Thursday.

Which headlines helped boost market sentiment yesterday?

We’re breaking them down for ya:

Headlines:

• RICS: A measure of U.K. house price increases came in at -19% in July, more negative than June’s -17% reading
• Japan bank lending rate steadied at 3.2% y/y as expected in July
• BOJ Opinions Summary showed that members discussed further rate hikes and painted a picture of a more hawkish central bank bias
• Japan current account surplus shrank from 2.41T JPY to 1.78T JPY (2.34T surplus expected) in June
• In a speech, RBA Gov. Bullock said the central bank “will not hesitate to raise rates if it needs to“
• Kiwi strengthened as New Zealand quarterly jobs report surprised to the upside
• Japan Economy Watchers sentiment improved from 47.0 to 47.5 in July
• U.S. weekly initial jobless claims eased from 250K to 233K (241K expected) in the week ending August 3
• FOMC voting member Tom Barkin said that inflation elements “seem to be settling down” but that the Fed has “some time” to figure out its policy path

Broad Market Price Action:

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

With not much in the way of major data releases or game-changing news, financial markets moved within wide ranges during the Asian and early European sessions.

Bitcoin (BTC/USD) had a bit of a wild ride, breaking above the $56,000 support level and kicking off an intraday uptrend that pushed the original crypto close to $63,000 by the end of the day. Meanwhile, WTI oil prices had a solid day, finding support around $74.75 during the European session—likely due to rising concerns over tensions in the Middle East.

The mood shifted to a more positive tone during the U.S. session after the latest weekly initial jobless claims report showed a decrease of 17,000 from the previous week. The data highlighted the strength of the U.S. labor market, leading some traders to start pricing in a slowdown rather than a full-blown recession.

This upbeat labor market news helped boost U.S. 10-year Treasury yields and gave U.S. stocks a lift. The S&P 500 surged to new weekly highs, marking its strongest day since November 2022, while U.S. 10-year yields climbed from 3.89% to 4.02%.

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

Overlay of USD vs. Major Currencies Chart by TradingView

The U.S. dollar had a mixed start to the day, reacting to some JPY-related volatility after the Bank of Japan released a hawkish Opinions Summary.

USD also gave up pips to AUD. See, Reserve Bank of Australia (RBA) Governor Bullock pushed back against calls for rate cuts, stating they don’t expect inflation to return to the target range until late 2025. She also emphasized that they “won’t hesitate to raise rates” if necessary. Yipes!

The Greenback didn’t make any major moves until the U.S. session kicked off with the initial jobless claims report. Signs of ongoing strength in the U.S. labor market helped the dollar recover some losses against other safe-haven currencies like CHF and JPY. However, the more risk-friendly environment that followed weighed on the dollar against “riskier” currencies like AUD, NZD, CAD, and GBP.

Upcoming Potential Catalysts on the Economic Calendar:

• Germany final CPI at 6:00 am GMT
• Switzerland SECO consumer climate at 7:00 am GMT
• Italy trade balance at 9:00 am GMT
• Canada’s labour market data at 12:30 pm GMT

The Euro and Canadian dollar may get more attention in the next few hours as Germany publishes its final CPI reading during the European session and Canada drops its July employment data during the U.S. session.

Canada’s jobs market numbers may influence Bank of Canada’s (BOC) biases, so make sure you’re glued to the tube during the release if you don’t want to miss out on any potential changes in CAD appetite!