Macro Commentary Jan 2024: Expert Insights

Financial Report Summary: Major Market Insights for September 2024

U.S. Dollar Index® (USDX) Performance: The U.S. Dollar Index® ended September down 1.11% at 100.52, marking its third consecutive monthly decline and wiping out all gains made earlier in the year. This drop was influenced by mixed economic data releases and a significant shift in Federal Reserve policy.

Key Economic Data and Events:

September 1st: The USDX opened the month at 101.65 but closed slightly down at 101.62 after a day marked by weaker ISM Manufacturing PMI data, signalling ongoing sector contraction. However, a marginal improvement over prior figures helped limit losses.
September 5th – ADP Employment Change: Reported a disappointing 99,000 new jobs for August (later revised to 103,000), significantly below the expected 145,000 and July’s downwardly revised 111,000. This shortfall emphasized a potential softening in the labour market. The ISM Services PMI showed slight improvement, rising to 51.5 from 51.4, but did not prevent the USDX from closing lower at 101.07 (down 0.16%).
September 8th–13th:
- Nonfarm Payrolls (NFP): August’s report indicated 142,000 new jobs, under

the market expectation of 160,000, but an improvement from July’s revised 89,000. The data suggested a labour market under strain but stabilizing. The USDX rebounded from a low of 100.53 to close at 101.14, marking a 0.13% gain on September 8th. The week, however, concluded with the USDX down 0.50%.

Inflation Data: Annual Core Inflation for August held steady at 3.2%, matching expectations. The CPI dropped to 2.5% from 2.9%, exceeding forecasts and signalling continued easing in price pressures. The USDX closed marginally higher at 101.66 with a gain of 0.03% after the data release.
September 18th – Federal Reserve Rate Decision: The Fed surprised markets with a 50-basis-point cut, lowering the benchmark rate to 4.75%–5%, the first cut since March 2020. This unexpected move, exceeding the anticipated 25-basis-point reduction, indicated an aggressive shift towards easing policy amid concerns about inflation moderation and labour market softness. The USDX reacted with volatility, closing down 0.31% at 100.28 on the announcement.
September 25th: The USDX experienced its strongest daily performance with a 0.65% gain, closing at 100.62. This rebound followed a

challenging week, where it had dipped to support levels near 99.88.

Weekly and Daily Performance Trends:

First Week of September: The USDX posted a 0.50% weekly loss as initial gains were offset by weaker employment data.
Mid-September: The rate cut by the Fed on September 18th sparked volatility, showcasing investor sensitivity to unexpected policy shifts. The USDX saw a sharp reaction, oscillating between testing Bollinger Band midpoints and encountering resistance).
End of September: The USDX hovered near the lower boundary of its Bollinger Bands, finding support as markets weighed mixed economic signals. It concluded the month with a loss of 1.11% closing at 100.52.

Equity Market Overview:

S&P 500 (ES) Futures: Benefited from the Fed’s dovish stance, as equities generally rallied on expectations of continued policy support amid easing inflation pressures.
Bitcoin (Coinbase BTC): Reached a September low at $52,620. Prices trended higher to a peak of $66,550 before closing up 9.2% at $63,796 after a strong monthly performance. This recovery came despite heightened geopolitical tensions, suggesting mixed sentiment in the crypto space.

Emini Crude Oil Futures (QM):

Performance: Crude oil declined 7.96% in September, closing at $68.17. Prices dropped to a low of $65.27 mid-month due to reduced demand outlooks but surged afterward as Middle East tensions escalated. OPEC+ maintained its current production policy, confirming a phased production increase for December.

Market Sentiment and Risk Considerations:

Geopolitical Influences: Increased tensions in the Middle East, particularly involving Israel and Iran, contributed to market caution. These developments affected oil prices, heightening investor wariness and impacting global risk appetite.
Economic Shifts: The Fed’s unexpected rate cut underscored a pivot towards supporting economic growth. This stance influenced the USDX’s performance, suggesting potential for further monetary easing if economic conditions required.

Technical Analysis:

USDX: Indicators pointed to a strong sell bias, as prices remained below the SMA and EMA for the 20 and 30 periods on both daily and weekly charts. Oscillators suggested mixed sentiment, indicating cautious market positioning.
Bitcoin: Showed strong upward movement, supported by favourable technical

conditions. Expected trading ranges for the next month projected between $50,000 and $78,000.
Crude Oil: Continued to exhibit a bearish technical trend, with volatility suggesting potential ranges from $64 to $80.

Economic Projections:

Monetary Policy Outlook: The Fed’s 50-basis-point cut highlighted an accelerated approach to easing. Market watchers anticipate that any future cuts will depend heavily on upcoming inflation and job data.
Growth Projections: While the labour market data signalled moderation, Q2 GDP figures holding at 3.0% growth provided a backdrop of underlying economic resilience.

Conclusion: September 2024 was marked by a continued decline in the USDX, driven by mixed economic data, a surprising Fed policy shift, and a sensitive market. Crude oil faced volatility influenced by geopolitical tensions, while Bitcoin showed a resilient climb amid broader caution. Equities remained steady, buoyed by dovish monetary policy signals.

'Macro Commentary'September 2024