Market Update 22/08/2024

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Global equity markets saw modest gains with minimal economic data influencing the moves. The S&P 500 rose by 0.3%, while the Euro Stoxx 50 and FTSE 100 closed up 0.6% and 0.1% respectively. Bond yields declined, with the US 10-year yield down by 2 bps to 3.79%.
 
The annual revision to US payroll growth drew attention due to the recent slowdown in the labour market. The Bureau of Labor Statistics reported a preliminary downward revision of 818k jobs, or about 68k per month for the year up to March. This marks the largest downward adjustment since 2009. The final data will be released next year. These revisions align with the Fed’s move towards a more balanced policy approach that takes growth dynamics into account.
 
The minutes from the July FOMC meeting showed that several Fed officials considered a rate cut before unanimously deciding to maintain the current rates. The ‘vast majority’ of policymakers noted that if the data continued to align with expectations, easing at the September meeting would be appropriate. In a more balanced tone, most participants acknowledged that risks to employment had increased, while inflation risks had diminished.
 
The USD continued its recent decline, weakening against G10 currencies as Fed rate cuts seem imminent.
 
NZDUSD reached new highs around 0.6165, benefiting from a weaker USD. It’s approaching a strong resistance zone 0.6200-0.6220, so it may be overextended. The USD index is near its December 2023 lows, and if NZDUSD breaks through the 0.6220 level, the next target could be around 0.6350.
 
NZDAUD is currently trading sideways. The AUD is performing well due to positive market sentiment and a hawkish RBA. In the short term, it might hover around the mid-0.9100s until there’s new data or central bank action. There’s likely resistance around 0.9200-0.9230 and support around 0.9050-0.9060, with further support at 0.8950. In the longer term, the pair may trend lower as the interest rate gap narrows, especially if the RBNZ continues cutting rates while the RBA holds steady, though this process could be gradual if the RBNZ sticks to small rate cuts.
 
NZDJPY dropped to 89.35 after reaching 90.15 yesterday, as the yen became one of the top performers following the dollar’s decline overnight.
 
There’s not much happening on the economic calendar today. The spotlight will be on PMI data from Australia and Japan, though these aren’t expected to be market-moving. However, the PMI numbers from the EU, UK, and US tonight will receive more attention.


Here are the latest mid-market rates:

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