Global Market Snapshot 2nd September 2024

This week, the main focus of the forex market is on the performance of the five major currencies: the US Dollar, Japanese Yen, British Pound, Euro, and Canadian Dollar. The market is experiencing significant volatility driven by expectations surrounding upcoming economic data and central bank policies.

The US Dollar has shown overall strong performance, likely to post its largest weekly gain since mid-June. Despite a 2.6% decline against the Japanese Yen in August, the Dollar’s overall trend has benefited from positive market reactions to US economic data. The US Personal Consumption Expenditures (PCE) Price Index for July rose by 0.2% month-on-month, in line with market expectations, which supports the market’s expectation of a 25-basis point rate cut by the Federal Reserve next month. Consumer spending grew by 0.5%, further strengthening the Dollar’s position. Market expectations for a 50-basis point rate cut at the Federal Reserve’s September meeting have diminished, with the probability now at 31%, down from the previous 35%.

USD/JPY saw a significant rise this week, marking its largest single-day gain in two weeks, mainly driven by the overall strength of the US dollar and weak economic data from Japan. The market holds a cautious outlook on Japan’s economic recovery, while expectations of the Federal Reserve’s policy direction are putting considerable pressure on the yen. Analysts pointed out that the extent of the USD/JPY increase reflects the market’s optimistic expectations for future Fed policies, and Japan’s economic weakness has further intensified the depreciation pressure on the yen.

GBPUSD, The British pound has shown weakness this week, with market attention focused on the UK’s economic data and the Bank of England’s monetary policy. Despite the economic data released this week failing to provide positive support for the pound, its overall trend continues to be influenced by global economic prospects. There is significant uncertainty in the market regarding the future direction of the Bank of England’s policies, particularly against the backdrop of increasing global economic uncertainty. In the short term, the pound’s movement is likely to be affected by broader market sentiment.

EURUSD fell to $1.1050 against the dollar, accumulating a decline of 1.3%, which is expected to be the largest weekly decline since April. Although the euro rose 2.1% in August, marking its best monthly performance since November 2023, expectations of an interest rate cut by the European Central Bank continue to put pressure on the currency. German inflation data cooled more than market expectations, further deepening investors’ expectations for future interest rate cuts by the European Central Bank. With the Federal Reserve likely to start a rate cut cycle in September, the market’s bearish sentiment towards the euro has increased.

USD/CAD exchange rate remains largely unchanged, quoted at 1.3484. Canada’s GDP growth rate for the second quarter was 2.1% on an annualized basis, exceeding analysts’ expectations. However, despite the strong data, the overall momentum of the Canadian economy showed signs of weakening as it entered the third quarter. The market expects that the Bank of Canada will continue to cut interest rates in September to address the slowdown in economic growth.

BTC, Bitcoin still lacked upward momentum, as it dipped below the level of $58,000 over the weekend.