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31/01/2024 - 08:54 UTCThe dollar continues to trade steadily within a tight range for the last two weeks, with the dollar index (USDX) showing no clear direction since January 17th. In focus for today is the FOMC monetary policy meeting where the Fed is expected to leave interest rates unchanged while investors will be watching closely for possible clues from Fed Chairman Jerome Powell on the likelihood of a rate cut in March.
According to the CME Fedwatch tool, the markets price in a 42.8% possibility that the 1st rate cut in 2024 will take place in the March FOMC meeting, while the possibility for an additional rate hike taking place in May is at 32.9%.
On Tuesday, the main market indices painted a mixed picture as the US 30 and the US 500 surged to new all-time highs while the tech heavy US tech 100 fell by 1.54% as data on Tuesday showed U.S. job openings unexpectedly increased in December and data for the prior month was revised higher, pointing to a still-resilient labour market. For today price activity remains subdued as traders wait for the outcome of the Fed's rate decision later in the day, with expectations being that the central bank will keep rates on hold.
Fourth quarter earnings are also in focus, with some key market players publishing their quarterly results this week, among which are Boeing, Aptiv, MasterCard, QUALCOMM, Qorvo and AvalonBay.
Oil prices posted moderate gains on Tuesday, as US imposed new sanctions to Venezuela and as higher global economic growth forecasts somewhat offset concerns around Chinese demand. On Feb. 1st, the focus could turn to an online meeting by leading ministers from OPEC and allies, where the group could decide its oil production levels for April and beyond.
Key releases are due later in the day, among which is the ADP Non-Farm Employment Change, FOMC statement and press conference, the Chicago PMI, the US employment cost index and Canada’s monthly GDP report.
The EUR/USD pair rose on Tuesday after staging a near-term comeback from 1.0800 this week, extending a recovery after Euro area Gross Domestic Product (GDP) figures stayed flat instead of declining as markets forecast.
Market participants kept a prudent approach ahead of the upcoming FOMC meeting, where the Federal Reserve is widely anticipated to keep the rate unchanged. However, investor discussions are shifting towards the timing of a potential rate cut, as recent data from key US fundamentals supports the view of a resilient economy.
Data on Tuesday showed that U.S. job openings unexpectedly rose in December while U.S. consumer confidence increased to a two-year high in January.
Gold prices climbed to a two-week high on Tuesday, supported by a softer dollar and lower Treasury yields while focus turned to the Federal Reserve's policy meeting for insight into how soon it will cut interest rates this year.
The Fed's policy decision is due on Wednesday, having made a dovish turn in the December meeting. Markets are widely expecting the U.S. central bank to leave rates unchanged at the end of the two-day meeting.
Last week data showed moderate growth in U.S. prices in December, keeping annual inflation below 3% for a third consecutive month and potentially allowing the Fed to begin cutting interest rates this year.
Oil prices settle higher Tuesday as simmering geopolitical tensions kept supply risks elevated at time when a stronger outlook on global growth helped boost crude demand hopes. The global growth outlook was given a boost, helping to ease concerns about crude demand. The International Monetary Fund lifted its forecast for global growth, projecting 3.1% in 2024, up from 2.9%.
The ongoing tensions in the Middle East were ratcheted up a notch after U.S. President Joe Biden said he has decided about how to respond to the deadly drone attack in Jordan.
In the U.S., the world’s largest consumer of crude, traders are keeping an eye on the latest two-day policy-setting by the Federal Reserve, which starts later in the session.
U.S main indexes ended the session on Tuesday mixed as the US 30 gained 0.42% to hit a new all-time high, while the US 500 fell 0.46%, and the US Tech 100 fell 1.54%.
The tech-heavy US Tech 100 lost ground on Tuesday as the market awaited a spate of high-profile corporate earnings and the Federal Reserve convened for its monetary policy meeting. Shares of Alphabet Inc and Microsoft Corp fell in extended trading after the companies released their quarterly earnings reports.
In terms of earnings, Boeing Co is set to release its results on Wednesday before the bell, while chipmaker Qualcomm Incorporated is scheduled to announce its quarterly earnings after the close.
The focus for traders on Wednesday will be the Fed's rate decision.
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