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01/11/2023 - 09:14 UTCThe U.S. Dollar posted moderate gains against most major currencies on Tuesday, with the dollar index (USDX) ending the day 0.58% higher at 106.58. The dollar value is seen trading in a tight range in the past few sessions, with investors positioning for the upcoming Fed meeting as well as chairman Jerome Powell’s press conference, where comments will be watched closely for possible signs on where interest rates are headed. Fundamentals from the U.S. recently painted a positive picture for the economy, raising expectations for a 25 basis point hike in December. According to the CME Group Fed Watch Tool, the possibility that rates will remain unchanged in November rose to 99.3%, from 98.3% yesterday and for December the same possibility is at 72.6%, while there is 27.4% chance for a rate hike.
Oil prices fell for yet another session on Tuesday, pressured by weak energy demand prospects from China as well as increasing chances that the Israel-Hamas war will not meaningfully affect Middle Eastern crude flows, however, this could possibly change if further escalation takes place and other Arab nations join the war. The main contracts WTI and Brent fell by 1.57% and 1.2% respectively on the iFOREX Platform.
The main stock market indices in the U.S. continue to rise on Tuesday, with the US 500 rising by 0.48%, the US 30 up by 0.16% while the US tech 100 gained 0.38% of its value, ahead of the long-awaited November 1st interest rate statement by the Fed. In individual stock news, Caterpillar shares sunk on prospects of weak demand while Nvidia closed lower after reports of possible cancellations of billions of dollars of orders to China. Pinterest shares ralled 19% after the company reported third-quarter revenue and profit estimates above expectations.
Aside from the FOMC rate statement and the press conference that follows, Tuesday’s schedule also includes a flurry of economic releases, including among others, the ADP Non-Farm Employment Change, ISM Manufacturing PMI, JOLTS Job Openings, monthly U.S. construction spending and crude oil inventories.
On the earnings front, a large number of companies are due to report their quarterly report, such as Conagra Brands, Clorox, Kraft Heinz, Garmin, Wayfair, Norwegian Cruise Line, PayPal, Avis Budget Group, American International Group, Airbnb, SolarEdge Technologies and QUALCOMM.
The EUR/USD initially reached weekly highs but then turned downward on Tuesday ending the day 0.34% lower, driven by a stronger US Dollar as markets prepared for US employment data and the FOMC meeting.
Data from the Eurozone showed that inflation further slowed in October, with the annual rate falling to 2.9% from 4.8% and below the market consensus of 3%. The core inflation rate dropped to 4.2%, in line with expectations.
The focus is now on US data and the FOMC meeting. Data from the US on Tuesday came in mixed, with a decline in consumer confidence, a 1.1% increase in the Employment Cost Index during the third quarter, and a decrease to 44 in the Chicago PMI. The numbers did not generate significant market impact.
Gold eased on Tuesday ending the day 0.59% lower but was set for its best month since March as the Israel-Hamas war sparked safe-haven flows, while focus shifted to this week’s U.S. central bank policy meeting.
Market focus this week is also on the U.S. Treasury’s refunding announcement and the Federal Reserve’s monetary policy decision on Wednesday, followed by the U.S. monthly jobs report on Friday.
Crude prices fell for a second consecutive day with WTI contract on iForex platform ending the day with losses of 1.57% as markets worried less about potential supply disruptions from the Middle East conflict and on data showing rising output from OPEC and the United States.
Weaker-than-expected manufacturing and non-manufacturing activity data in China stoked fears of slowing fuel demand from the world's No. 2 oil consumer.
Wall Street's main indexes ended Tuesday's session with gains as investors looked ahead to the Federal Reserve's monetary policy update while they digested a mixed batch of earnings reports. US 500 and US 30 ended the day with gains of 0.48% and 0.16% respectively while US Tech 100 rose 0.38%.
The Fed kicked off a two-day monetary policy meeting. The central bank is widely expected to hold interest rates steady on Wednesday, and investors will monitor its statement and Fed Chair Jerome Powell's comments for clues about its plans. Data showing a solid increase in U.S. labor costs in the third quarter prompted some concerns the Fed could keep interest rates higher for longer.
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