As risk sentiment deteriorates further on an accelerating big tech selloff, stock markets fall sharply as the Japanese Yen makes outsized gains.

1. Markets are dominated by strengthening risk-off sentiment, over concerns about corporate earnings (mainly in the tech sector) and fears of economic slowdown leading to recession before rate cuts can provide soft landings. The S&P 500 Index had its worst day in almost 1 year, closing more than 2% lower, while the tech-based NASDAQ 100 Index closed lower by 3.65% yesterday. Asian stocks have followed US markets lower, with strong falls seen today in major Asian indices. It looks increasingly as if the strong rally in stock markets seen over previous months is over.
2. The CME FedWatch tool shows a 99.5% expectation that the Fed will cut rates at its September meeting, with almost 13% now expecting a larger cut of 0.50%. This reflects increasing concern that the Fed will have to scramble to avoid a recession in the USA.
3. In the Forex market, we have seen strong price movement over the past day driven by an extremely strong Japanese Yen. Since today’s Tokyo open, the Australian Dollar has been the weakest major currency in the Forex market, while the Japanese Yen has been the strongest, putting the AUD/JPY currency cross and the USD/JPY currency pair in focus. The US Dollar penetrated a strong zone of resistance beginning at 103.92, but the price action there has turned bearish, suggesting that the Dollar is most likely to move lower over the short term.
4. The Bank of Canada cut its Overnight Rate yesterday for the second consecutive month as expected, by 0.25% to 4.50%. The Bank stated that further cuts are likely as inflation continues to trend lower. The Canadian Dollar responded by getting weaker.
5. The Indian Rupee is still threatening to break down to a new record low against the US Dollar, after making a record low close last Friday. The Rupee remains in danger of falling to a new low, so the USD/INR currency pair will remain in focus today.
6. Many commodities are trading sharply lower over the past day, with Silver standing out due to the strength of its fall to a near 3-month low price.
7. The data releases yesterday of Flash Services & Manufacturing PMI in the USA, UK, Germany, and France were very mixed.
8. There will be releases today in the USA of Advance GDP data which is expected to show an annualized rate of economic growth of 2%, and Unemployment Claims.

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