The U.S. dollar traded between gains and losses struggling for direction against other major currencies on Wednesday, with the dollar index (USDX) ending the session with a moderate decline. Some price action could be observed. Disappointing U.S. retail sales data sparked a sell-off in the dollar overnight, as investors interpreted it as a sign of sluggish economic growth and a potential shift towards Fed rate cuts later this year.
Market expectations, as reflected by the CME FedWatch Tool, heavily favor a rate cut by the Fed in September (59.5% with November also a strong possibility (50.6%).
In other news, the sterling held steady ahead of a BoE meeting, where the bank will make public its monetary policy decision. The BoE is widely expected to keep rates steady on Thursday, and the focus will be on any guidance on how soon an easing cycle could begin.
Optimism continues to run high on Wall Street, all three main stock indices marking new all-time highs on a daily basis, driven by hype in the AI space and anticipation of key economic data and Fed speeches. Om Wednesday, U.S. financial markets were closed for the Juneteenth holiday, potentially limiting trading activity a day after Nvidia surpassed Microsoft to become the world's most valuable company. Nvidia's stock price rose more than 3% to $135.58 in the prior session, pushing its market cap to $3.34 trillion and above Microsoft's valuation of $3.31 trillion. Dell Technologies Inc led by CEO Michael Dell, has announced a partnership with NVIDIA Corporation to construct an AI Factory designed to boost the capabilities of Grok, an AI model developed by Elon Musk's company
Economic data takes center stage today with the Bank of England making public its interest rate decision while later on US jobless claims, US building permits, the Philly Fed Manufacturing Index, US housing starts and EU Consumer Confidence numbers are due.