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11/04/2024 - 08:16 UTCThe dollar surged against most majors on Wednesday, with the dollar index (USDX) ending the session higher by 1.04%, currently trading at levels last seen in November 2023. According to reports, the move could be attributed to a combination of strong jobs data, hawkish comments by the majority of Fed officials and hotter-than-expected U.S. inflation data that lowered expectations of the Fed starting its rate-cutting cycle in June.
According to the CME Group's FedWatch tool, bets that the first cut in rates will occur in June, plummeted to 16.4% from levels seen earlier this week of 60%, while the of rates remaining steady jumped to 83.1%.
Wall Street sentiment weakened even further following the higher-than-expected inflation numbers, with the three main equity indices falling deep into negative territory. Pressure comes from doubts over the Fed’s monetary policy outlook as well as a surge in treasury bond yields and a surge in the value of the dollar. For Thursday, the focus shifts to producer prices report for a clearer picture of March inflation, while later this week, the first batch of earnings reports is due from the banking sector and specifically from Wells Fargo, JPMorgan Chase and Citigroup.
With the bitcoin halving underway, cryptos market capitalization stands at 2.65 trillion on Thursday, from levels above 2.7 trillion dollars seen in the previous session. Toncoin, one of the top ten cryptos by market capitalization, continues to outperform the rest in daily gains. Bitcoin and Ethereum both gained by 2.17% and 1.18% respectively, trading right below their all-time highs.
Market focus for today shifts to ECB’s monetary policy announcement, where markets anticipate comments from President Christine Lagarde that could shed some light with regards to the central bank’s rate hike planning. Some price action could also be observed upon the release of monthly core PPI numbers and unemployment claims from the US while several Fed members, including Greene, Bostic and Barkin are due to speak.
The EUR/USD pair posted a sharp decline on Wednesday ending the session 1.08% lower. This decline has occurred following the release of hot inflation figures from the US which fuelled hawkish bets on the Federal Reserve (Fed).
The US Bureau of Labor Statistics revealed on Wednesday that the nation's inflation rate, reflected by the Consumer Price Index (CPI), increased from 3.2% in February to 3.5% in March on an annual basis. Both the CPI and the core CPI climbed by 0.4% monthly, exceeding analysts' projection of 0.3%. As a reaction, US Treasury yields soared while the odds of a June Rate cut by the Fed declined to over 20%.
On the other hand, the FOMC Minutes disclosed a general lack of assurance amongst participants concerning the persistence of high inflation rates, with recent data failing to bolster their trust in the economy cooling down and t in the inflation rate steadily reaching the 2% benchmark.
Gold prices slipped from record-high levels on Wednesday ending the session 0.82% lower as the U.S. dollar and Treasury yields firmed after a stronger-than-expected inflation print softened expectations of an early U.S. rate cut.
A Labor Department report showed the Consumer Price Index (CPI) rose 0.4% monthly in March. Federal Reserve officials worried that progress on inflation might have stalled, making a longer period of tight monetary policy necessary, according to the minutes of the U.S. central bank's March 19-20 meeting.
Oil prices rose around a $1 on Wednesday after three sons of a Hamas leader were killed in an Israeli airstrike in the Gaza Strip, feeding worries that ceasefire talks might stall.
Moreover, in early trade oil prices fell after U.S. government data showed crude oil and fuel inventories swelled by much more than expected on weak demand and lower oil exports.
U.S. crude stocks climbed by 5.8 million barrels in the week ended April 5, more than double the rise of about 2.4 million barrels analysts had expected. Refined products inventories rose unexpectedly with gasoline up by 700,000 barrels and distillate stocks by 1.7 million barrels.
U.S. stocks tumbled to a lower close on Wednesday after hotter-than-expected inflation data threw cold water on hopes that the Federal Reserve would begin cutting interest rates as early as June.
All three major U.S. stock indexes veered sharply lower with US 500 loosing 1.24% while US 30 and US Tech 100 retreated 1.38% and 1.14% respectively.
The hot CPI data, coupled with hawkish-leaning minutes from the Fed’s March meeting, saw traders sharply reverse expectations for a 25 basis point hike in June.
Investors will now focus on Thursday's producer prices report for a clearer picture of March inflation, and the unofficial kick-off of first quarter earnings season. On Friday, a trio of big banks - JPMorgan Chase & Co , Citigroup Inc and Wells Fargo & Co are slated to post results.
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