Daily Market Outlook – Thursday, Aug. 22

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 Following the generally positive signals from global markets overnight, Asian stock markets are mostly up on Thursday. The Japanese market reversed the losses from the previous session and is now much higher on Thursday. The Nikkei 225 is trading back above the 38k handle supported by financial, technology, and exporter firms. The market leader SoftBank Group is flat, while Fast Retailing, the company that runs Uniqlo, is up about 3%. Among automakers, Honda is slightly increasing by 0.1% while Toyota is losing 1.5%. However, traders are cautious after revised data revealed that US job growth was lower than previously reported in the year ending in March 2024, raising some growth concerns. Nonetheless, it is anticipated that the US Federal Reserve will lower interest rates next month. The minutes of the US Federal Reserve’s most recent meeting on monetary policy appeared to lend further credence to predictions of a September interest rate reduction. Following the release of the minutes, interest rate cuts by the Fed are expected to occur next month. According to CME Group’s FedWatch Tool, there is a 61.5 percent likelihood of a quarter point rate drop and a 38.5 percent chance of a half point rate cut. Since U.S. short-term rates are currently on the back foot, traders have been gradually selling the dollar, believing that they still have more room to fall. By year-end, the markets have priced in 161 basis points of easing in Europe and 135 bps in Britain, compared to 222 bps in the United States. The euro and sterling have both breached significant resistance, and the dollar has reached one-year lows as investors speculate about the possibility of a cyclical decline in the currency. The relative momentum in each economy may be determined by purchasing managers’ index data for the United States and Europe, which are expected later on Thursday. The purchasing managers indexes shocked last month when the manufacturing sector experienced a steeper decline than anticipated. Germany continued to be the pressure point.  The UK, on the other hand, has shown itself to be resilient; in May, manufacturing resumed its expansionary trajectory. It is anticipated that the increase in production (52.0 from the 52.1 reading in July) will continue. An crucial factor will be whether or not the decline in services activity happens again this month. According to the median forecast, services will increase in Britain while falling a few percentage points in the Eurozone. It is possible, though, that UK activity will also weaken (52.4 from 52.5) as part of the (short) bounce in post-election activity unwinds.  Less weight is given to the US PMIs, which are thought to be a worse indicator than the more reliable ISM surveys. However, the disparity between better and worse services and manufacturing should also be apparent. Given the enduring weakness of manufacturing and the dependence of service firms on the production side (manufacturing should lead services in a business cycle), it is worthwhile to contemplate the longevity of this imbalance. That point of risk is reinforced by the fact that this disparity is worldwide. 
 Overnight Newswire Updates of Note

          (Sourced from reliable financial news outlets)
 FX Options Expiries For 10am New York Cut (1BLN+ represents larger expiries, more magnetic when trading within daily ATR)

CFTC Data As Of 16/8/24

Technical & Trade ViewsSP500 Bullish Above Bearish Below 5550

EURUSD Bullish Above Bearish Below 1.10

GBPUSD Bullish Above Bearish Below 1.30

USDJPY Bullish Above Bearish Below 149

XAUUSD Bullish Above Bearish Below 2480

BTCUSD Bullish Above Bearish Below 58000

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