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26/10/2023 - 07:35 UTCThe U.S. Dollar continues to gain gradually against most major currencies on Wednesday, with the USDX ending the session up by 0.29%. The moderate increase in the dollar value could be attributed to risk sentiment taking a hit by weak performance in Wall Street and Treasury yields returning to a positive trajectory. 10-year Treasury yields rose once again, closing in on 16-year highs of 5.0% seen earlier this week. While a rate hike on November 1st is highly unlikely, according to the CME Group Fed Watch Tool, chances of a rate hike in December are at approximately 29.1% rising from 24.8% yesterday.
Cryptos continue to ascend on Wednesday, with the Bitcoin adding another 1.75% to its value, currently trading above the $34.5K mark while Ethereum added a mere 0.16% on Wednesday and another 1.2% early on Thursday, crossing the $1800 mark. The overall crypto market cap remains elevated at around 1.310 trillion as seen early on Thursday. Weakness in recent earnings reports of the seven top blue-chip technology companies seems to be boosting cryptos as fears emerge of a possible tech recession.
Gold prices recovered once again on Wednesday, adding another 0.51% on the daily chart, as fears of a possible escalation in the war remain in play and as missile strikes on Gaza continue, while Israel reiterated its commitment to a ground assault on the region.
The main stock market indices in the U.S. fell sharply on Wednesday, with the US 500 declining by 1.79%, the US 30 is down by 0.68% while the US tech 100 lost more than 3% of its value, pressured by a drop in tech giant Alphabet after its cloud division missed revenue estimates, while other mega-cap stocks also edged lower, pressured by rising U.S. Treasury yields.
Aside from earnings, the focus now shifts to key fundamentals 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 dropped for the second consecutive day, losing 0.27% due to a stronger US Dollar.
The German IFO Business Survey surprised to the upside, with the headline index at 86.9, surpassing expectations of 85.9. This marked the first increase since April. The Eurozone Central Bank reported a decrease in year-on-year private loans growth to 0.8% from 1% in August. The ECB is expected to keep interest rates unchanged later today, as inflation slows down and economic activity remains subdued.
Housing data released in the US surpassed expectations on Wednesday. Attention now turns to the European Central Bank (ECB) meeting and US economic data, with a focus on Q3 Gross Domestic Product. Additionally, Jobless Claims and Durable Goods Orders will be relevant.
Safe-haven gold gained on Wednesday, buoyed by continued conflict in the Middle East, while investors looked forward to key U.S. economic data for further cues on the Federal Reserve’s policy path. The geopolitical concerns seem to support gold for the next period.
Market participants’ attention turns to U.S. third-quarter GDP figures due on Thursday and the U.S. PCE price index on Friday that could impact the Federal Reserve’s outlook on interest rates.
Oil prices rose about 2% on Wednesday, buoyed by worries about conflict in the Middle East, but gains were capped by higher U.S crude inventories and gloomy economic prospects in Europe. The WTI on iForex platform posted daily gains of 1.84% ending the session above $85.00 per barrel.
U.S., crude inventories rose by 1.4 million barrels in the latest week to 421.1 million barrels, the Energy Information Administration (EIA) reported, exceeding the 240,000-barrel gain expected by analysts in a Reuters poll.
Crude demand could get a boost in China, the world's biggest oil importer, which approved a bill to issue 1 trillion yuan ($137 billion) in sovereign bonds and allow local governments to issue new debt from their 2024 quota to boost the economy.
U.S. stocks tumbled in a broad sell-off on Wednesday as Alphabet shares slid after the Google parent posted disappointing earnings and as U.S. Treasury yields rose, reviving fears that interest rates could stay higher for longer. U.S main indexes posted a sharp decline with US 500 and US Tech 100 losing 1.79% and 3.14% respectively while US 30 ended the session 0.68% lower.
Among earnings, companies including Amazon.com Inc, International Business Machines, Intel Corporation, Merck & Company Inc and Ford Motor Company are scheduled to report quarterly results.
Market participants will be closely monitoring core durable goods orders, preliminary GDP and PCE prices. Jobless claims pending home sales and a speech from the Fed’s Waller.
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