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05/06/2024 - 08:05 UTCThe U.S. dollar posted a mild recovery against other major currencies on Tuesday, with the dollar index (USDX) gaining by 0.11% following four consecutive daily increases and hitting multi-month lows. The move came following data that showed U.S. job openings fell more than expected in April reaching their lowest in more than three years, according to the JOLTS report. This report attracted market attention as a preliminary indication on the health of the employment sector ahead of Friday's Non-Farm Payrolls report.
According to the CME Fedwatch tool, bets for the first rate hike to occur in September currently at 55.3% while for the same scenario to occur in November, the possibility stands at 48.4%.
In other news, the Canadian dollar steadied on Tuesday, ahead of the Bank of Canada policy meeting where are investors will look for hints on the timing of the rate cutting cycle for some of the world's biggest economies. The Bank of Canada meets a day ahead of a European Central Bank meeting on Thursday and according to reports, there is high possibility that both banks could take the first step in cutting rates.
Oil prices continue to plummet on Wednesday, with the two main benchmarks WTI and Brent losing another 1.49% and 1.3% of their values respectively, following reports that the Organization of the Petroleum Exporting Countries (OPEC) and its allies plan to increase supply from October despite recent signs of weakening demand growth.
The main US stock market indices gained slightly on Tuesday, as a job openings report fuelled hopes that rate cuts could come sooner than anticipated while the focus now shifts to key employment numbers due on Friday. Additional support came from a decline in Treasury yields, with the yield on the 10-year bond trading 4.333% lower. In corporate news, Intel Corporation presented a series of artificial intelligence chips, following similar announcements by Nvidia and AMD yesterday, in an attempt to narrow the wide gap on its rivals.
The key focal point for investors this week is the Non-Farm Payrolls report due on Friday which is expected to show 185,000 new jobs created in May, up from 175,000 in April.
The EUR/USD pair declined 0.23% on Tuesday ending the session near 1.0880 level. US data failed to deliver signs of a steepening economic slowdown in the US, sending broad-market hopes for signs of Federal Reserve (Fed) rate cuts back to the bottom and sparking a fresh bout of risk-off safe haven bidding.
Meanwhile, the US Bureau of Labor Statistics has reported lower-than-expected JOLTS Job Openings data for April. The agency reported that fresh job postings were 8.06 million, lower than expectations of 8.34 million and the prior release of 8.35 million, downwardly revised from 8.49 million.
The European Central Bank (ECB) is broadly expected to deliver a quarter-point cut when the ECB meets this week on Thursday. Going forward, investors will focus on the US ISM Services PMI, ADP Employment Change and the Nonfarm Payrolls (NFP) report for May.
GOLD prices inched lower on Tuesday ending the session 0.93% lower as the US dollar firmed, while investors focussed on the US non-farm payrolls report due later in the week for more cues on the Federal Reserve’s rate-cut plans.
US job openings fell more than expected in April, as labour market conditions soften in a manner that could help the Fed’s fight against inflation.
Investors now await the non-farm payrolls data due on Friday to gauge the US economy’s health and if it will deter the Fed from cutting rates in September.
Oil prices fell on Tuesday on scepticism about an OPEC+ decision to boost supply later this year into a global market where demand has already shown signs of weakness.
Moreover, oil prices extended their losses after the American Petroleum Institute reported domestic crude stocks unexpectedly jumped last week, muddying expectations for a seasonal pick up in energy demand over the summer.
U.S. crude inventories increased by about 4.0 million barrels for the week ended May. 29, compared with a draw of 6.5M barrels reported by the API for the previous week.
U.S. stock index futures rose on Tuesday, as weak U.S. economic readings ramped up hopes that the Federal Reserve will have to eventually cut interest rates to support growth. Furthermore, indexes rose after data showed job openings in the world’s largest economy fell to a three-year low in April. The data pointing to easing in the labour market suggest the economic strength seen so far this year could be cooling. The weak labour data also comes just days before key nonfarm payrolls data, which is a key gauge of labour market strength.
Tesla’s sales of China-made electric vehicles fell by 6.6% to 72,573 in May compared to a year ago. Moreover, Intel Corporation unveiled a slew of artificial intelligence chips, a day after Nvidia and AMD made a similar announcement as the chipmaker looks to narrow the wide gap on its rivals.
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