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07/03/2024 - 08:52 UTCThe dollar traded moderately lower against most major currencies on Wednesday, with the dollar index (USDX) ending the day 0.40% lower, following the first of two testimonies this week by Fed chairman Powell where he confirmed the Fed’s intentions to begin cutting rates in 2024 with no clear clues as to the timing and scale of the planned cuts, stating that the path of the U.S. economy and inflation was likely to determine any monetary easing. Additional comments were made later by Minneapolis Fed President Neel Kashkari, who said that he did not see more than two, or even one rate cut this year.
According to the CME Fedwatch tool, following the recent developments, bets for a first rate cut to take place in the June 2024 FOMC meeting are at 60.1%.
Gold prices posted noteworthy gains on Wednesday, and continued higher early on Thursday, hitting record highs following the comments from Federal Reserve Chair Jerome Powell and data showing that U.S. private payrolls rose slightly less than expected according to the ADP report.
Wall Street is back on a positive track on Wednesday, with all three main stock indices closing in the green ahead of a European Central Bank rate decision, another congressional testimony from Federal Reserve Chair Jerome Powell and U.S. jobs data.
In company news, several more key market players will announce their Q4 earnings reports this week, among which are Bilibili, Kroger, Broadcom, DocuSign, MongoDB, Costco and Oracle.
On the cryptos front, the top two cryptocurrencies by market capitalization, Bitcoin and Ethereum, both recovered most of the losses seen on Tuesday, ending the session higher by 3.42% and 7.43% respectively on Wednesday with the latter touching highs last seen in December 2021. The overall market capitalization currently stands close to 2.64 trillion dollars.
The main focus for this week is most likely on the nonfarm payrolls data due on Friday, for more hints as to the health of the labor market, which is also a key consideration for the Fed in adjusting rates.
The EUR/USD pair managed to surpass the barrier of 1.0900 on Wednesday ending the session 0.40% higher and advancing to multi-week tops after the discouraging prints from the ADP report and the lack of surprises from Fed Powell's testimony.
Powell suggested that interest rate reductions are probable within the year. However, such cuts will only be implemented once the Fed acquires greater confidence in the trajectory of inflation returning to its annual target of 2%.
Fed Chair Powell will be speaking again today for the second half of two-day testimony before the US Congressional House Financial Services Committee.
The European Central Bank (ECB) is set to announce its Monetary Policy Decision later in the day. The ECB is anticipated to maintain the Rate on Deposit Facility at 4.0%, marking the fourth consecutive meeting without a change.
Gold rallied to a record on Wednesday, building on positive momentum driven mostly by bets for U.S. monetary easing. Gold got an additional fillip as the dollar fell after Fed Chair Jerome Powell indicated a rate cut later this year. Gold prices ended the session on Wednesday 0.91% higher above the level of $2145,00 per ounce.
Powell said in an overnight testimony that the Fed did intend to cut interest rates in 2024- a scenario that bodes well for non-yielding assets such as gold.
Focus is now squarely on key nonfarm payrolls data due on Friday, for more cues on the labor market, which is also a key consideration for the Fed in adjusting rates.
Oil prices edged up about 1% on Wednesday on a smaller-than-expected build in U.S. crude inventories, a big withdrawal from distillate and gasoline stocks and remarks by the U.S. Federal Reserve chief that he still expects interest rate cuts this year.
The U.S. Energy Information Administration (EIA) said energy firms added a smaller-than-expected 1.4 million barrels of crude into stockpiles during the week ended March 1, while distillate and gasoline inventories fell by much more than expected.
Tensions in the Red Sea, a key oil shipping route, ratcheted up and raised supply disruption fears after a Houthi missile attack struck a Greek-owned cargo ship, near Yemen, killing at least two people.
Wall Street's three major indexes closed higher on Wednesday as economic data and comments from Federal Reserve Chair Jerome Powell reinforced expectations that the U.S. central bank would reduce its benchmark interest rate this year. At the close, US 500 added 0.41% while US 30 and US Tech 100 gained 0.16% and 0.31% respectively.
Data showed U.S. private payrolls increased slightly less than expected in February. The Job Openings and Labor Turnover Survey (JOLTS) showed job openings fell marginally in January, while hiring declined as labor market conditions continued to gradually ease.
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