Flash PMIs dominated sentiment across the European and US sessions with downside disappointments. Sentiment for the euro was already knocked when composite PMIs from France and Germany fell to 33 and 39-month lows respectively, before the eurozone PMI also fell to a 33-month low. With services also having seemingly topped, it suggests service-driven inflation levels globally may continue to soften. Regardless, it brings into serious doubt as to whether the ECB really need to hike again in September or not.
If it's a race to the bottom among composite PMIs, the eurozone has the slight edge over Australia. Although the prospects of the US PMI on the verge of contraction came as the bigger surprise. US manufacturing contracted faster than expected to fell to a 2-month low of 47 (49 expected) and services barely expanded at 51 (52.3 expected), dragging the composite PMI down to a mere 50.4.
UK PMIs didn’t disappoint with their downside misses either, with the composite PMI contracting at its fastest pace in 33 months, services posted its slowest expansion in seven months and weakest manufacturing in 39. Dare we say this removes the need for another 50bp hike from the BOE (Bank of England).
- Whilst weak data in Europe weighed on GBP and EUR and supported the US dollar, weak US data came as the bigger surprise to see earlier USD gains evaporate and helped EURUSD bounce from 1.0800.
- The US dollar index (DXY) topped just below 104 and closed back beneath the July high, hinting at a false break ahead of Jerome Powell’s Jackson Hole speech tomorrow
- Bond yields were slammed, with the 30-year falling at its fastest pace since the regional banking crisis according to my colleague David Scutt
- Wall Street pounded on the prospects of Fed rates not remaining ‘higher for longer’, sending the Dow Jones, S&P 500, Nasdaq 100 and Russell 2000 broadly higher.
- Nvidia’s share price surged 10% after the close after delivering stronger-than-expected earnings, revenue and guidance. Tesla and Meta also rallied during after hours traded and helped S&P 500 E-mini rise a further 0.6%.
- WTI crude oil fell for a third day on demand concerns, with its OHLC of the day al occurring below $80.
Events in focus (AEDT):
- There is no major economic news in today’s Asian session
- 22:30 – US jobless claims, durable goods orders
ASX 200 at a glance:
- It was the most bullish day in six for the ASX 200 which closed back at Monday’s opening price
- Yet performance among sectors was mixed, with five rising and six declining
- It was similar at the constituent level, with 98 ASX 200 stocks rising, 88 declining and 14 unchanged
- However, the ASX 200 dies seem to be forming a base above 7100, and
AUD/USD technical analysis (daily chart):
I had a hunch at the start of the week that AUD/USD wanted to retrace higher to the May low, which achieved by Tuesday. Yet the bout of weak USD weakness has seen AUD/USD extend above that key level and appears ready to tag 0.6500. It is worth noting that last week’s low made a failed attempt to break trend support projected from the 2020 low, so perhaps there is some further upside potential. Of course, Jerome Powell’s speech at 15:05 GMT on Friday (00:05 AEDT Saturday) is likely to be the largest USD catalyst of the week. If his speech is more hawkish than expected, then a move back to 64c for AUD/USD seems plausible, whereas if he tips his hat to a weaker economy then it might provide the catalyst to shake more AUD/USD bears from the tree and send the Aussie comfortably above 65c.
Gold technical analysis (4-hour chart)
We have now seen the anticipated pullback to the 1917 – 1920 region (high volume node, monthly S1 pivot and round number). However, the original plan was to now seek evidence of a swing high. Whilst that remain a possibility, I’m now open to the potential of another leg higher lead into Jerome Powell’s Jackson Hole speech, as hawkish bets may be scaled back to soften the US dollar. Therefore, low volatility dips today towards 1905-1910 are of interest for a potential move to 1935 (HVN) - 1940.
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