U.S. Growth Rebounds; Asia’s Markets React to New Data

U.S. growth rebounds with Q2 GDP surpassing forecasts; Tokyo CPI surge signals a possible BoJ rate hike. Today’s market attention is on the PCE Price Index, with a weak bias for most currencies and oil.

U.S. Economic Data Overview

The U.S. economic landscape showed robust signs of recovery in the second quarter of 2024. The advance estimate for Q2 GDP came in at 2.8%, surpassing the market forecast of 2.0%. Increased consumer spending, a rebound in goods consumption, and wholesale and retail trade gains drove this growth. Non-residential investment and defense spending also contributed to the economic upswing. This contrasts sharply with the slower growth observed in Q1, which had plummeted to 1.4% from 3.4% in Q4 2023.

The report showed unemployment claims at 235K, slightly below the expected 237K but still above historical norms. This suggests a lingering softness in the labor market. The Dollar Index (DXY) exhibited volatile movements, initially spiking to 104.45 before settling around 104.35 by the end of the session.

Implications for the Asia Session

Japanese Yen (JPY)

Tokyo’s core CPI surged to 2.2% YoY in July, marking the third consecutive month of acceleration. This trend may prompt the Bank of Japan (BoJ) to consider a rate hike in its upcoming policy meeting. The yen has strengthened substantially, gaining nearly 4.3% over the past three weeks, with USD/JPY dropping below 152.50 before retracing to around 153.90. However, expectations are further upward pressure on the yen to persist.

Australian Dollar (AUD)

The Australian dollar has also recently faced significant depreciation, falling from 0.6783 to a low of 0.6514. It was trading near 0.6550 as Asian markets opened, with key support and resistance levels at 0.6465 and 0.6580, respectively. The Reserve Bank of Australia’s cautious stance on monetary policy, holding the cash rate at 4.35%, suggests a gradual approach to managing inflation and economic growth.

New Zealand Dollar (NZD)

The Kiwi dollar has dropped nearly 4.3% recently, hitting a low of 0.5882 before stabilizing. Key support and resistance levels are at 0.5875 and 0.5950. The Reserve Bank of New Zealand’s recent monetary policy stance remains restrictive, but economic weakness and subdued inflationary pressures suggest continued downward pressure on the NZD.

Euro (EUR)

The German Ifo Business Climate index fell to 87.0 in July, indicating continued economic challenges in Germany. The euro weakened, dropping to a low of 1.0825 and ranging between 1.0810 and 1.0895. While indicative of restrictive policy, the European Central Bank’s decision to maintain interest rates reflects ongoing economic struggles and inflationary pressures.

U.S. Growth Rebounds; Asia’s Markets React to New Data

Swiss Franc (CHF)

The Swiss franc briefly dipped below 0.8800 before rebounding to around 0.8810. The Swiss National Bank’s recent policy actions, including a rate cut to 1.25% and moderate GDP growth forecasts, suggest a cautious outlook. Moreover, the Key support and resistance levels for USD/CHF are 0.8780 and 0.8880, respectively.

British Pound (GBP)

The pound has weakened recently, falling below the 1.2900 mark. It was trading around 1.2860, with support and resistance levels at 1.2780 and 1.2940. The Bank of England’s decision to hold the Bank Rate at 5.25% reflects a balancing act between inflation and economic growth.

Canadian Dollar (CAD)

The Canadian dollar has been weak recently, with USD/CAD climbing to an overnight high of 1.3850 before retreating to around 1.3810. Key support and resistance levels are 1.3780 and 1.3850. The Bank of Canada’s cautious stance and moderated inflation expectations highlight a careful approach to monetary policy amid economic recovery signals.

Oil

Stronger-than-expected U.S. GDP growth has bolstered crude oil demand. WTI crude oil spiked to $79.70 per barrel before settling. Despite the recent decline in oil prices, robust economic data and continued demand suggest a potential for further gains.

Key News Events Today

• PCE Price Index (12:30 pm GMT): The Federal Reserve’s preferred inflation gauge showed a slight uptick in June, which could influence market movements and impact the strength of the dollar

24-Hour Biases

• DXY: Weak Bearish
• Gold (XAU): Medium Bearish
• AUD: Weak Bullish
• NZD: Weak Bullish
• JPY: Weak Bearish
• EUR: Weak Bullish
• CHF: Weak Bearish
• GBP: Weak Bullish
• CAD: Weak Bearish
• Oil: Weak Bullish

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