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09/04/2024 - 07:57 UTCThe US Dollar is started the week with the left foot, as the Dollar index (USDX) ended the session with moderate losses of 0.24% ending the session below the mark of 104.00. Mild market fluctuations for the USD continue to make waves as the Federal Reserve’s (Fed) cautious stance is calibrated considering incoming data. The US economy has yet to show clear evidence of a moderation of inflation and economic activity, which makes the Fed comfortable to start cutting rates.
According to the CME Fedwatch tool, markets pricing odds just above 51% of the easing cycle to start in June.
On the energy front, oil prices fell on Monday ending a multi-session rally after Israel reduced its troops in Southern Gaza and began a fresh round of ceasefire talks with Hamas. Moreover, the decline in oil prices was also capped by uncertainty around how Iran will respond to the bombing of its consulate in Syria last week.
U.S Stocks were essentially unchanged on Monday, ahead of crucial inflation data and the kick-off of first-quarter earnings season. Investors will be watching to see whether Wall Street majors can justify a massive run-up in valuations seen over the past three months.
Fresh remarks from Fed speakers are set to arrive this week with Kashkari, President Austan Goolsbee, New York Fed President John C. Williams, Atlanta Fed President Raphael Bostic, Francisco Fed President Mary C. Daly are among the Fed speakers due this week. Consumer price index inflation data for March was Wall Street’s biggest point of focus this week. The reading is due on Wednesday and is expected to show inflation potentially picking up and remaining squarely above the Fed’s 2% annual target.
The EUR/USD pair bounced back on Monday ending the session above the 1.0860 level adding moderate gains of 0.30%. The decline of the US Dollar provided some support to the major pair.
Investors will focus on the US Consumer Price Index (CPI) for March, which will be published on Wednesday. Annual headline inflation is forecasted to have accelerated to 3.4% from 3.2% in February. In the same period, the core CPI that strips off volatile food and Oil prices is estimated to have dipped slightly to 3.7% from 3.8%.
On the Eurozone front, investors shift focus to the European Central Bank’s (ECB) interest rate decision, which will be announced on Thursday. The ECB is widely anticipated to keep its key borrowing rates steady at 4.5%.
Gold prices hit a record high on Monday ending the session with gains of 1.19%, fuelled by central bank purchases and geopolitical tensions, while strong economic data failed to dull bullion's attraction.
China's central bank added 160,000 troy ounces of gold to its reserves in March. Turkey, India, Kazakhstan, and some eastern European countries have also been buying gold this year.
Traders are pricing in around a 52% chance of a first 25 basis point cut in U.S. rates in June, CME Group data showed. However, data showed on Friday that U.S. job growth blew past expectations in March, calling into question the timing of rate cuts.
Oil prices settled lower Monday after Israel withdrew soldiers from parts of Gaza and committed to renewed dialogue over a potential ceasefire with Hamas, easing Middle East tensions that have threaten to disrupt oil supplies in the region.
Teams from Israel and Hamas met in Egypt for renewed ceasefire talks, with the dialogue coming just days before the Eid holidays this week.
On the other hand, expectations of tighter oil supplies remain in play as it had also boosted crude prices in recent weeks. Investors will scour consumer price index data from the U.S. and China this week for further clues on economic health of the world's top two oil consumers.
U.S. stock index futures moved little on Monday ending the session flat, tracking a muted close on Wall Street as anticipation of key inflation data and the beginning of the quarterly earnings season dissuaded big trades.
Consumer price index inflation data for March was Wall Street’s biggest point of focus this week. The reading is due on Wednesday and is expected to show inflation potentially picking up and remaining squarely above the Fed’s 2% annual target. More commentary from the Fed is also on tap this week, with the minutes of the Fed’s March meeting due later on Thursday.
Furthermore, major Wall Street banks will kickoff the earnings season in earnest later this week, with many eager for evidence on whether the upcoming earnings can justify recent run-up in stocks. Major U.S. lenders JPMorgan Chase, Citigroup, and Wells Fargo will report earnings on Friday.
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