Market Update 02/09/2024

Welcome to our daily market update, where we help keep you informed on the latest happenings in the world of FX.
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Equities generally rose, with the S&P 500 up 1.0%, the Nasdaq gaining 1.1%, and the Dow adding 0.6%. However, in Europe, the Euro Stoxx 50 dropped 0.2% and the FTSE 100 stayed flat. Meanwhile, bond yields increased, with the US 10-year yield rising 4 bps to 3.90%.
 
Headline and core PCE data indicated prices rose by 0.2% m/m, matching expectations. This translates to annual rates of 2.5% and 2.6% respectively, with the three-month annualized core PCE at 2.0%. Given that this is the Fed’s preferred inflation measure, it strongly suggests a 25 bps rate cut in September.
 
US consumer sentiment saw its first improvement in five months during August, as slowing inflation and the potential for Federal Reserve rate cuts boosted optimism about personal finances. The University of Michigan’s final August sentiment index increased to 67.9, up from 66.4 in July.
 
The spotlight remains on the USD, with key data ahead likely causing some volatility before the FOMC decision on September 19th. Technically, the market seems heavily short but has maintained support levels set in January 2023. A rebound on the dollar index (DXY) to 104.00 seems probable in the coming month, particularly if equities face challenges and markets become more risk-averse.
 
NZDUSD closed slightly lower in Friday’s offshore session, stabilizing after its strong gains throughout August. Current support levels are 0.6225, 0.6150 and 0.6105, with resistance at 0.6300, 0.6330 and 0.6370.
 
NZDAUD appears technically overbought, and with iron ore showing some recovery, there’s a chance it could test the lower end of its range. Support levels are at 0.9200, 0.9155 and 0.9110, while resistance is at 0.9275 and 0.9315.
 
NZDJPY reached 4-week highs near 91.40 and has recovered about 50% of its steep decline that started in July. JPY was the weakest among G10 currencies, as investors overlooked higher than expected Tokyo CPI figures, which typically predict national trends, aligning with the Bank of Japan’s move towards policy normalization.
 
NZDEUR ended the week right at the 0.5660 resistance & support level and may face some short-term challenges. Eurozone consumer prices rose 2.2% y/y in August, down from July’s 2.6% and the lowest since June 2021, which could strengthen the case for a rate cut in two weeks i.e., 13^th September. However, market sentiment around Europe remains uncertain due to mixed data, and with a rate cut already priced in, this pair is delicately balanced. Support levels are at 0.5625, 0.5580 and 0.5520, with resistance at 0.5660, 0.5695 and 0.5725.
 
The week begins quietly with minimal data and public holidays in the US and Canada for Labor Day. The main events today include Australian building approvals at 1:30 pm and China’s Caixin manufacturing PMI at 1:45 pm. The key event to watch internationally will be the US Non-Farm Payrolls on Friday, another weak result could lead markets to consider the possibility of a 50 bps cut from the Fed instead of 25 bps cut.
 
 
Here are the latest mid-market rates: