Forexlive Americas FX news wrap: What a day, it had everything

• FOMC interest rate decision: Rates unchanged but statement highlights dual risks
• Full statement from July 2024 FOMC rate decision
• Powell: We have made no decisions about September but broad sense is we’re moving closer
• Powell opening statement: Labor market is ‘strong but not overheated’
• ADP July employment 122K vs 150K expected
• US Q2 employment cost index +0.9% vs +1.0% expected
• Canada May GDP MoM 0.2% vs 0.1% estimate
• US June pending home sales +4.8% vs +1.5% expected
• EIA weekly US oil inventories -3436K vs -1088K expected
• Iran issues order to strike Israel directly in response for Haniyeh assassination – report
• Netanyahu: Israel is prepared for all scenarios
• Meta and Qualcomm jump after earnings
• PBOC to shift MLF date to the 25th as part of policy framework overhaul
• Mastercard sees ‘continued healthy customer spending’

Markets:

• WTI crude oil up $3.74 to $78.47
• US 10-year yields down 11 bps to 4.03%
• Gold up $38 to $2446
• S&P 500 up 1.6%
• JPY leads, USD lags

This has to be the ‘day of the year’ in financial markets, it had everything. USD/JPY is down 500 pips from when the BOJ leaks started, Aussie CPI was a game-changer, Chinese PMIs were soft, Powell floated ‘several’ rate cuts, the Middle East is back on the brink of war, chipmakers went parabolic with NVDA adding $329 billion in market cap today alone, plus it was month end.

I could go on.

I’m not sure there is an over-arching theme in all of it but the market took it as a reason to buy nearly everything, though crypto was a notable outlier in a rare major divergence from the Nasdaq.

From Powell, I didn’t see anything that was particularly notable and many would have been disappointed he wasn’t more tilted towards a September rate cut. The market picked up on him floating ‘several’ rate cuts but in the same breathe he also said they might not cut at all. Despite that, the market is now priced for 72 bps in easing at the remaining three meetings.

One way of looking at it though is that Powell knew Sept was fully priced and didn’t push back against that or pricing further out the curve. I’m sympathetic to that line of thinking, especially with signs of a slowdown in inflation and global growth.

I worry that some of these moves were exaggerated though that might not be the case with chipmakers. Both Microsoft and today Meta emphasized higher capex spending next year after a massive increase this year. They aren’t showing any doubts about the AI revolution or strategy. That conviction feeds back into productivity gains and lower inflation, likely with some layoffs to come as well in the global workforce (17 million people work in call centres worldwide).

Late in the day, yields really collapsed and I will be watching that very closely in the day ahead. US 10s are down to 4.04%, very close to the 4% line in the sand, which should provide some support.

This article was written by Adam Button at www.forexlive.com.