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10/04/2024 - 08:06 UTCThe dollar showed little change on Tuesday against other major currencies with the dollar index (USDX) ending the session slightly higher, while on a weekly basis there appears to be a 0.17% retracement from gains posted in the previous month. The dollar is currently in consolidation mode, as support from solid jobs data seems to be overshadowed by a decline in treasury yields from 4-month highs.
According to the CME Group's FedWatch tool, bets that the first cut in rates will occur in June, are standing at about 60%, up from 51% seen on Monday, although the possibility of a hold has jumped to 40%.
Wall Street sentiment appears weak, with the three main equity indices closing the session with mixed results as investors remain on the sidelines ahead of key US inflation data and the beginning of the first quarter earnings season. Forecasts for March CPI indicate a rise of 3.4% on a yearly basis from 3.2% in February. The inflation data follows solid employment numbers reported last Friday that surpassed forecasts, raising doubts on how soon the central bank will proceed with rate cuts. On the earnings front, the first batch of reports involves the banking sector and specifically Wells Fargo, JPMorgan Chase and Citigroup.
In cryptos, market capitalization surpassed the 2.7 trillion dollars mark while among the top ten cryptos by market capitalization, Toncoin leads in weekly gains, trading over 34% higher.
Some price action would likely be observed today upon the release of monthly core CPI data, an interest rate statement from the Bank of Canada, minutes of the last FOMC meeting and a weekly crude oil inventories report from the EIA. In the week ahead focus could shift to the ECB’s monetary policy announcement on Thursday, where markets anticipate comments from President Christine Lagarde that could shed some light with regards to the central bank’s rate hike planning
The EUR/USD pair ended the session on Tuesday with minor losses despite hitting new multi-week tops earlier in the session,
Both the Federal Reserve and the European Central Bank are expected to initiate easing cycles, possibly starting in June. However, the pace of subsequent interest rate cuts may differ, potentially resulting in divergent strategies between the two central banks.
Fed Kashkari contended that potential rate cuts for the current year are at risk if inflation remains stagnant, whereas A. Goolsbee emphasized the need for the Fed to consider the effects of a restrictive policy stance, and FOMC Governor M. Bowman remarked that efforts to reduce inflation have hit a roadblock.
Gold extended its record run on Tuesday ending the session 0.69% higher fuelled by buying momentum and geopolitical risks, while the spotlight shifted to the Federal Reserve's policy meeting minutes and U.S. inflation data for insights into U.S. rate cut timeline.
Bigger gains in the yellow metal were held back chiefly by anticipation of key U.S. consumer price index data, which is due later today.
Bullion is considered a hedge against inflation and geopolitical uncertainties, but higher interest rates tend to dull the appeal of holding the non-yielding asset.
Oil prices settled lower Tuesday, as market participants weighed Middle East tensions amid little sign of progress on talks for a ceasefire in Gaza and fresh signs that Israel hasn't given up on plans to launch an offensive in Rafa.
Israeli Prime Minister Benjamin Netanyahu said a date has been set to launch an offensive Rafah in southern Gaza as he suggests that an offensive in Rafa is key to defeating Hamas.
Furthermore, the Energy information Administration raised its outlook for global oil demand, forecasting higher consumption for 2024 and 2025.
U.S. crude inventories rose by about 3.03 million barrels for the week ended Apr. 6, compared with a decline of 2.3 barrels reported by the API for the previous week. The official government inventory report due Wednesday is expected to show weekly U.S. crude supplies increased by about 2.4M barrels last week.
The US Tech 100 and US 500 ended the session on Tuesday with modest gains, weighed down by financial stocks as market participants braced for major U.S. banks to kick off the earnings season for Q1 on Friday.
Market participants turn their focus on today's inflation data to assess the timing and extent of the Federal Reserve's rate-cutting face. The reading ies expected to show the YoY inflation picked up slightly to 3.4%, remaining well above the Fed's annual 2% target. The minutes of the Fed's March meeting are also due today and are likely to offer more insight for the rate-cut plans this year.
Anticipation of the first-quarter earnings season kept the sentiment on edge, as market participants waited to see if the valuation over the first quarter could be justified.
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