Market Update 12/08/2024

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US equities rose as recession fears eased, while European and UK equities had mixed results. The S&P 500 gained 2.2%, the Euro Stoxx 50 remained unchanged, and the FTSE 100 fell by 0.3%. The yield on the US 10-year increased by 6.00 bps to 4.00%.
 
Markets wrapped up a significant week on a calm note. The S&P 500 and Nasdaq both gained 0.5%, while in Europe, the Euro Stoxx 50 rose 0.1% and the FTSE 100 increased by 0.3%. Bond yields dropped, with the US 10-year yield down 5bps to 3.94%.
 
Speaking over the weekend, Fed Governor Bowman, one of the most hawkish FOMC members, noted that she still sees inflation risks and ongoing strength in the labor market. This might make it difficult for her to support rate cuts.
 
Most economists are predicting three consecutive 25bps rate cuts from the Fed at the September, November, and December meetings, steering clear of the larger 50bp cut that had been widely discussed in the market after recent non-farm payrolls and volatility.
 
Canada’s recent labor market report presented a mixed picture. Employment unexpectedly dropped by 3,000 in July, mainly due to a decline in part-time jobs. However, the unemployment rate remained steady at 6.4%, slightly below forecasts. The data didn’t alter market expectations that the Bank of Canada will continue with 25bps rate cuts at upcoming meetings for the rest of the year.
 
NZDUSD settled around 0.6000 during Friday’s offshore session, following an earlier push higher in New Zealand’s trading session, providing some much-needed relief for importers. We briefly reached the 100-day moving average at 0.6039 before pulling back, making this a resistance level early this week. On the downside, the initial panic seems to have eased, so we might see buyers stepping in around 0.5980, especially from those looking to catch up with offshore equity gains. Offshore markets remain influential before focusing on RBNZ’s Interest Rate update on Wednesday.
 
NZDAUD remained steady around 0.9125. After rallying within various moving averages last week, we’re now hovering around the 50% Fibonacci retracement of the June/July sell-off at 0.9131. The RBNZ’s upcoming statements will be closely watched and could significantly influence the Kiwi, especially against the AUD. If expectations ease, we could see the pair testing higher levels, with mild resistance at the 100-day moving average around 0.9147. On the downside, the August lows and the 38% Fibonacci level near 0.9088 should offer initial support around 0.9090-9100.
 
NZDJPY has edged down to 88.00. The yen ended a volatile week on a quieter note, with USD/JPY dipping slightly to 146.60.
 
NZDGBP and NZDEUR saw modest declines, ending the week at approximately 0.4700 and 0.5500, respectively.
 
In the week ahead, the key domestic event will be the RBNZ Cash Rate meeting on Wednesday at 2:00 pm. In Australia, we’ll have Employment Wages data on Tuesday at 1:30 pm, followed by Employment figures on Thursday at 1:30 pm.
 
The offshore calendar is quite busy, with several significant US releases: PPI on Wednesday at 12:30 am, CPI on Thursday at 12:30 am, and retail sales on Friday at 12:30 am. Additionally, we’ll see monthly activity indicators from China, UK CPI and labour market data, and Japan’s GDP figures.


Here are the latest mid-market rates:

NZD/USD 24 HOURS 

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