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06/06/2024 - 07:49 UTCOn Wednesday, the US Dollar Index (DXY) extended its gains despite mixed signals about the US economy. The solid performance of the service sector, coupled with lower-than-expected private sector employment data, caused a moderate stir in the market. The dollar index (USDX) gained 0.16% recovering from multi-months lows seen on Monday. All eyes are now on the upcoming labor market data such as Nonfarm Payrolls, Wage inflation, and Unemployment numbers, which will provide deeper insights into the state of the US economy.
The markets will closely monitor these cues to readjust their bets on rate cuts from the Federal Reserve (Fed). According to the CME Fedwatch tool, bets for the first-rate hike to occur in September currently at 56.8% while for the same scenario to occur in November, the possibility stands at 47%.
In other news, the ECB is anticipated to cut its interest rates by 25 basis points later today reducing the main refinancing, the marginal lending, and the deposit rate to 4.25%, 4.50%, and 3.75%, respectively. Following the monetary policy statement a Press Conference by President Christine Lagarde will take center stage later on Thursday.
On the energy front, Oil prices settled higher Wednesday, rebounding from four-month lows as optimism of sooner Federal Reserve rate cuts helped offset worries about demand following an unexpected build in domestic crude stockpiles. The two main benchmarks WTI and Brent rose 2.01% and 1.93% respectively on Wednesday after hitting multi-months lows earlier in the week.
The main U.S. stock market indices gained on Wednesday with the US 500 and US Tech 100 hitting record closing highs, powered mainly by technology stocks as markets digested economic data that could support a much-expected start to the Federal Reserve's policy easing cycle. Focus was now on more upcoming readings on the labor market, with nonfarm payrolls due on Friday set to offer definitive cues on the sector.
The EUR/USD pair dropped on Wednesday ending the session 0.07% lower. The major currency pair falls amid caution ahead of the European Central Bank’s (ECB) interest rate decision, which will be announced later today.
Moreover, the US ADP reported weak private payroll data for May. Number of jobseekers hired by private employers came in at 152K, lower than expectations of 173K and the former reading of 188K, downwardly revised from 192K. ISM Services PMI for May recovered to 53.8, exceeding the market expectation of 50.8 and marking considerable growth from April's reading of 49.4.
Later this week, the release of the US Nonfarm Payrolls (NFP) report for May will significantly influence market speculation about the Fed reducing interest rates from the September meeting.
Gold’s price rebounded and advanced on Wednesday ending the session 1.13% higher, following the release of mixed US economic data that could warrant lower borrowing costs set by the US Federal Reserve (Fed).
The US 10-year benchmark note coupon added to its weekly losses as it went down three basis points to 4.297%, its lowest level since April, following a softer-than-expected US jobs report.
The golden metal was also boosted by commodity prices stabilizing following Tuesday's plunge, which witnessed a more than 4% drop during the first two days of the week. Additionally, upbeat Caixin PMI data from China hints that the economy might continue to grow.
Oil prices rose on Wednesday as hopes of an interest rate cut by the U.S. Federal Reserve in September outweighed demand concern after data showed builds in U.S. crude and fuel stocks.
U.S. crude inventories jumped by 1.2 million barrels in the week to May 31, confounding estimates for a draw of 2.3 million barrels, data from the U.S. Energy Information Administration showed. The build in crude inventories fuelled further worries about demand at a time when some continue to bet on the season pick up demand over summer
U.S. stock index futures rose on Wednesday, extending gains after persistent bets on interest rate cuts and a rally in heavyweight Nvidia put Wall Street at record highs. A series of weak labour market readings drummed up hopes that the Federal Reserve will begin cutting rates by September. The May private payrolls report on Wednesday was the latest data to suggest an easing in labour market tightness that could propel the Fed to begin cutting rates this year.
Nvidia's market valuation hit the $3 trillion mark for the first time as the chipmaker overtook Apple to become the world's second-most valuable company. Sentiment over AI was also upbeat ahead of Apple’s developer conference next week, where the tech giant is widely expected to unveil AI features for its flagship devices.
Focus was now on more upcoming readings on the labour market, with nonfarm payrolls due on Friday set to offer definitive cues on the sector.
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