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20/09/2024 - 07:53 UTCThe US dollar fell against most major currencies on Thursday, with the dollar index (USDX) ending a choppy session down by 0.26% and moving even lower early on Friday, hovering around levels last seen in July 2023. According to reports, the Fed's 50 bps rate cut, signaling a new era of easing, is the primary factor behind the downward trend.
According to the CME's FedWatch, the market is pricing in a 57.6% probability of a 0.25% rate cut in November. Bets for a 50 bps rate currently stand at 42.4%
In other news, the Bank of Japan (BOJ) unanimously maintained its interest rate policy, expressing confidence in a steady uptick in both inflation and economic growth. Although the central bank didn't explicitly signal a more aggressive stance, its forecast of rising inflation aligns with expectations for future interest rate hikes. Several policymakers have hinted at rate increases in the near future, particularly as inflation accelerates. Despite a weekly decline, the yen remained near its 2024 peak, likely supported by the anticipation of higher interest rates in the months ahead.
Wall Street's primary indices surged on Thursday, with the US 30 and the US 500 hitting new record highs led by gains in the technology sector, a day after the Federal Reserve started its easing cycle with a substantial half percentage point reduction. Big tech including Meta Platforms Inc, Apple Inc and Tesla Inc led the broader market higher showing gains of 3.99%, 3.78% and 7.47% respectively. Chipmakers were also in the spotlight, led by NVIDIA that was up by 4% and Intel Corporation which gained 1.83%. Intel announced that it had no intention of selling its majority stake in Mobileye Global Inc.
The crypto space is also gaining traction in tha past week, with the two main cryptocurrencies by market capitalization, Bitcoin and Ethereum, up by 9.6% and 9.1% in the past seven trading sessions. The overall crypto market capitalization rose in the past week from $2.13 trillion to to $2.27 trillion.
Some price action could be observed later in the session, upon the release of EU consumer confidence data, Canada’s retail sales, a speech by ECB’s Lagarde and a speech by FOMC member Harker.
The EUR/USD pair rose on Thursday, hovering near the 1.1160 level. However, much of the pair’s upward momentum stems from a broader selloff in the US Dollar (USD) rather than any significant strength in the Euro (EUR).
On the US front, Initial Jobless Claims fell to 219K for the week ending September 13, down from the revised 231K the prior week and below the market’s forecast of 230K. Additionally, the Philadelphia Fed’s Manufacturing Survey for September significantly exceeded expectations, with the index improving to 1.7 from the previous reading of -7.0, beating forecasts of -1.0.
Meanwhile, Federal Reserve Chair Jerome Powell reassured markets that the Fed’s recent 50 basis point rate cut was not a reactionary move to worsening economic conditions. Instead, Powell positioned the cut as a proactive "recalibration" aimed at supporting the US labor market.
Gold prices climbed on Thursday after the Federal Reserve (Fed) initiated an easing cycle with a 50-basis-point rate cut. Despite a rise in US Treasury yields, which typically have an inverse relationship with the non-yielding metal, gold continued its upward momentum, edging closer to the $2,600 mark.
Following the Fed’s decision, gold extended its gains, recovering from the previous day’s losses. Powell noted that inflationary pressures have eased, and the labor market remains robust. However, he also cautioned that if inflation persists, the Fed could "dial back policy more slowly," adding that the central bank is "not in a rush" to normalize its stance based on current projections.
Oil prices rallied on Thursday, buoyed by a risk-on sentiment following the Federal Reserve's significant interest rate cut on Wednesday. The Fed’s aggressive move alleviated concerns that a slowing US economy would further dampen demand for crude.
The better-than-expected labor market data helped ease concerns about the health of the US economy, particularly in the wake of the Fed’s 50-basis-point rate cut on Wednesday.
Government data released on Wednesday revealed a larger-than-expected draw of 1.63 million barrels in US crude inventories, surpassing expectations of a 0.2 million barrel draw.
The US 500 surged to a record high on Thursday, fueled by the Federal Reserve’s 50-basis-point interest rate cut and signals of further reductions ahead. All three U.S. main indexes ended the session on the upside.
Leading the charge were heavyweight stocks that have driven much of this year's market rally. Tesla jumped over 7%, while Apple and Meta Platforms both rose nearly 4%.
The rally was further supported by stronger-than-expected jobless claims data, which fueled optimism across global markets.
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