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16/11/2023 - 08:23 UTCThe U.S. dollar index (USDX) recovered a small piece of Tuesday’s losses on Wednesday, ending the session 0.33% higher, closing right above the 104.0 mark. This move came following the release of solid U.S. retail sales and manufacturing data and despite core PPI numbers falling at their fastest pace since April 2020.
According to the CME Group Fed Watch Tool, the possibility that rates will remain unchanged in December rose to 100% on Thursday from 94.5% seen the day before.
In other news, data from the U.K. showed some easing in last month’s inflation, hitting its slowest pace in two years. This reading prompted a reassessment of the monetary policy outlook for the Bank of England while adding pressure to the sterling. Fundamentals in Japan indicated a contraction in the economy for the period of July to September, preventing the central bank from getting out of its ultra-easy monetary policy while sending the yen to one-year lows close to 152.
The main U.S. stock indices are seen trending higher this week, with the US 500 and the US 30 adding almost 2% to their values while the US tech 100 gained by 1.68% so far this week on the back of softer U.S. inflation numbers and a resilient Chinese economy.
In the energy sector oil prices declined sharply over the last 6 weeks, with WTI and Brent down by almost 17% and 13% respectively since the beginning of October. Data released late Wednesday by the U.S. Energy Information Administration showed that U.S. inventories grew more than expected .
Among the main highlights for Thursday are speeches by a series of central bankers at various events, including ECB President Christine Lagarde. Investors will be looking for further clues that more interest rate hikes are becoming increasingly unlikely.
In addition, U.S. jobless claims, the Philly Fed Manufacturing index, industrial production data and earnings by Alibaba Group will also be in focus.
The EUR/USD pair ended the session on Wednesday with losses of 0.225 correcting from its monthly highs. Despite the daily loss, the bias remains to the upside, supported by negative sentiment around the US Dollar following another US inflation report.
The US Producer Price Index (PPI) declined by 0.5% in October, contrary to expectations of a 0.1% increase. The annual rate also slowed from 2.2% to 1.3%. The annual Core PPI fell from 2.7% to 2.4%. Another report showed that Retail Sales fell by 0.1% in October, which was a better reading than the expected 0.3% decline.
On Thursday, economic data from the US includes the weekly Jobless Claims, Industrial Production, and the Philly Fed report.
Gold prices traded between gains and losses on Wednesday and ended the session with losses of 0.10%.
Gold prices initially rose to a more than one-week high on Wednesday as the U.S. dollar and Treasury yields weakened after cooler inflation data boosted bets that a U.S rate cut might come sooner than earlier priced in by investors.
The dollar firmed after strong U.S. retail sales data, offsetting support from hopes that the Federal Reserve had come to the end of its tightening cycle. Treasury yields rebounded after a revision of retail sales data showed strong gains in September.
Oil prices retreated on Wednesday after a bigger-than-expected rise in U.S. Crude inventories along with mounting worries about demand in Asia. The WTI contract on iForex platform ended the session 2.27% lower.
The U.S. Energy Information Administration reported that inventories of U.S. crude rose by about 3.6m barrels in the week ended Nov. 10, well above expectations of a build of about only 1.8m barrels.
The arise in dollar also added pressure on oil prices as the greenback rebounded from a slide a day earlier despite data on Wednesday.
U.S main indexes ended the session mixed on Wednesday with US 30 adding daily gains of 0.31% while US Tech 100 and US 500 ended the session 0.25% and 0.01% lower.
Retailing giant Target beat profit expectations, as same store sales fell 4.9%. Its guidance for the fourth quarter was in line with expectations. Its shares closed nearly 18%.
Energy stocks were dragged lower by falling oil prices following weekly U.S. crude inventory showing a much higher than expected increase in U.S. Crude stockpiles.
Investors will also be keenly watching for earnings reports from retail companies due on Thursday, with Macy’s Inc and Walmart Inc expected to report before the bell, and Gap Inc after the market closes.
market participants will also be monitoring import and export price indexes, jobless claims, industrial production as well as speeches from Barr, Williams, Kroszner and Mester.
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