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25/10/2023 - 08:46 UTCThe U.S. Dollar recovered against most major currencies on Tuesday, with the USDX ending the session up by 0.64%. The moderate increase in the dollar value could partly be attributed to U.S. reports showing that both the manufacturing and service sectors, rose to their highest level since July, potentially giving the U.S. Federal Reserve more room to keep interest rates high. Chances of a rate hike by the Fed in December are at approximately 24.8% according to the CME Group Fed Watch Tool, rising from 22.6% yesterday.
Cryptos are back in the spotlight, with the Bitcoin adding another 2.5% to its value, currently trading above the $34K mark while Ethereum gained by more than 1% closing in on the $1800 mark. The overall crypto market cap remains unchanged around 1.3 trillion as seen yesterday. Funds shifted to cryptos recently on rising speculation that the United States could soon approve a bitcoin exchange-traded fund.
Gold prices posted a sharp drop to $1953 per ounce early on Tuesday, only to recover later in the session and close the day at $1973. Pressure in gold could derive from expectations that interest rates could stay higher for longer, especially as data released on Tuesday showed that local business activity improved in October.
The main stock market indices in the U.S. posted a moderate increase on Tuesday, with the US 500 gaining 0.33%, the US 30 up by 0.62% while the US tech 100 rose by 0.36% supported by solid quarterly results and positive prospects for the upcoming earnings reports of some of the main market players that weigh heavily on the price of the index.
Aside from earnings, there will also be a series of key economic data this week ahead of the Fed's meeting on Oct. 31 - Nov. 1. The U.S. Commerce Department on Thursday will announce third-quarter gross domestic product, which is seen accelerating to 4.3%. The Personal Consumption Expenditures (PCE) report is due on Friday and is expected to show annual core inflation cooling down to 3.4% and 3.7%, respectively.
The EUR/USD pair started the week by posting gains, almost reaching the 1.07 mark on Monday, however, strength in the dollar drove the pair lower to a closing price of 1.0595 on Tuesday.
U.S. business and manufacturing data showed improvement for October recovering from a five-month contraction, supported by a rise in new orders, and services activity which accelerated modestly amid signs of easing inflationary pressures, S&P Global said on Tuesday.
For Wednesday, the focus turns to key speeches from Fed chairman Powell and ECB president Lagarde.
Gold broke below the tight range of $1,965 and $1,983 seen in the past few sessions to hit a new weekly low at $1,953 on Tuesday, only to recover later in the session back to the $1,973 level.
Developments in the Middle East conflict remain in focus for gold traders; however, U.S. economic data also comes to the spotlight in the upcoming sessions as key growth and key inflation reports are due. The U.S. PCE price index that is expected on Friday, is considered the Federal Reserve's favored inflation gauge and could play a role in determining the course of U.S. monetary policy in the near future.
Oil prices are declining sharply so far this week, with WTI posting consecutive losses of 1.85% on Monday and 2.84% on Tuesday, on the back of reduced demand prospects from Europe and intense diplomatic efforts in the Middle East in an attempt to contain the conflict between Israel and Hamas.
Steps are being made to establish a humanitarian pause in the conflict while at the same time euro zone business activity data took a surprise downturn this month, suggesting the bloc may slip into recession, creating a drag on the outlook for oil demand.
Solid performance was observed in the main U.S. indices on Tuesday, with the US 500 gaining 0.33%, the US 30 up by 0.62% and the US tech 100 posting a rise of 0.36% for the session.
These moves came as shares of Microsoft Corp posted gains after beating quarterly revenue estimates, while Alphabet Inc lost ground following the release of its revenue. Verizon surged more than 9% after raising its annual free cash flow forecast, while General Electric rose more than 6% after the conglomerate lifted its full-year profit forecast. Coca-Cola hiked its
Investors now shift their focus to Thursday’s GDP release by the Commerce Department for a first take on third quarter growth which is expected to accelerate to 4.3% from 2.1% in the second quarter. On Friday, the closely watched Personal Consumption Expenditures (PCE) report, is due.
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