It will be a quiet Asian and European session in terms of economic data on Thursday. However, later in the day, the US is expected to release the weekly Jobless Claims report and Durable Goods Orders. Market participants are awaiting news from the Jackson Hole Symposium, where ECB President Lagarde and Fed Chair Powell will deliver speeches on Friday.
Here is what you need to know on Thursday, August 24:
The US Dollar had its weakest day since early August, as the DXY (Dollar Index) fell from its two-month highs around 104.00, dropping below 103.50. The correction of the US Dollar gained pace following the release of weaker-than-expected US PMI figures. On Thursday, the weekly Jobless Claims and Durable Goods Orders reports are due.
US S&P Manufacturing PMI drops to 47 in August, Composite PMI edges lower to 50.4
US Treasury yields pulled back from multi-year highs, exerting downward pressure on the US Dollar. The 10-year yield dropped below 4.20%, while the 2-year yield fell below 5%. Additionally, the improvement in risk sentiment also had an impact on the Dollar. The Dow Jones index gained 0.54%, and the Nasdaq climbed 1.59%.
Market participants await Fed Chair Powell's speech on Friday at the Jackson Hole Symposium. His words could establish the framework for the upcoming months or reiterate previous messages. The next FOMC meeting is scheduled for September 19-20. According to the CME Fed Watch Tool, there is an 88% probability of a pause in interest rate hikes.
The Eurozone preliminary August PMI came in below expectations, with the Composite PMI dropping from 48.6 to 47. The EUR/USD pair found support at 1.0800 and rebounded from the 200-day Simple Moving Average towards 1.0860, driven by a weaker Greenback. However, despite the correction, the overall bias remains to the downside.
Commerzbank Research on Eurozona data:
We see our forecast confirmed that the euro area economy will shrink slightly in the second half of the year. Today's data also argue against another ECB rate hike. So far, the ECB's projections have assumed that the euro area economy will continue to grow noticeably in the second half of the year. Due to today's Purchasing Managers' Index figures, the ECB is likely to revise this expectation and significantly downgrade its projections in September.
GBP/USD was weakened by the UK PMI data, which came in below expectations, with the Composite index falling below 50 for the first time since January. As a result, the pair rebounded from levels near 1.2600 to around 1.2740. The June low near 1.25690 remains a key level to watch, and a break below it could potentially trigger further losses. On the other hand, EUR/GBP rebounded from one-year lows below 0.8500 to around 0.8540.
The Japanese yen had its best day in weeks against the US dollar, primarily driven by lower government bond yields. Weaker-than-expected PMI data reduced expectations of further tightening from the European Central Bank (ECB) and the Bank of England. As a result, the USD/JPY pair dropped below 145.00, reaching its lowest level in two weeks.
The Australian PMI data came in below expectations. However, the Australian dollar benefited from the change in market sentiment, leading to a rebound in AUD/USD from 0.6410 to 0.6479, reaching the highest level in a week. Although the main trend is still downward, it would not be surprising to see further gains in the short term.
Retail sales in New Zealand experienced a decline of 1% in the second quarter, which was better than the consensus expectation of -2.6%. Despite this, the NZD/USD pair rose noticeably for the second consecutive day. However, it is still trading below the 0.6000 level.
In Canada, retail sales increased by 0.1% in June. However, when excluding auto sales, there was an unexpected drop of 0.8%. Concurrently, the decline in crude oil prices weighed on the Canadian dollar, causing it to underperform compared to the AUD and NZD. The USD/CAD pair reached its highest level since May, above 1.3600, but subsequently reversed sharply towards 1.3520. The pair appears poised to extend its bearish correction.
Lower government bond yields contributed to the recovery in metals. Gold accelerated to the upside on Wednesday, rising towards the 20-day Simple Moving Average (SMA) at $1,920. Silver experienced a significant jump of almost 4%, breaking above $24.00 and reaching its highest level in three weeks.
The improvement in risk sentiment also had a positive impact on cryptocurrencies. Bitcoin rose by 3% to $26,600, while Ethereum rallied by 3.60% to $1,688.
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