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10/11/2023 - 09:13 UTCThe U.S. dollar index (USDX) posted a moderate increase on Thursday, ending the session 0.37% higher, right below the 106.0 mark. The dollar received some support on Thursday, following Fed Chair Jerome Powells warning that rate hikes are still on the table as the central bank seeks to bring inflation totally under control. The target inflation rate for the Fed is at 2% and Powell stated that he is not confident that it can be achieved without further rate hikes.
According to the CME Group Fed Watch Tool, the possibility that rates will remain unchanged in December remains at 90.6% on Friday, while there is a 9.4% chance for a rate hike.
The main US stock market indices reversed their course on Thursday and started to descend, with the US 500 ending the session 0.74% lower, the US 30 was down 0.59% and the US tech 100 posted a loss of 0.82%. This move came following a 30-year treasury bond auction, where results disappointed investors as they displayed weak demand and caused yields to climb, thus supporting the dollar and pushing down equities.
Cryptos have been on a sharp uptrend for the past 5 weeks, with Bitcoin up by more than 33% since the beginning of October, jumping from $27K to trade currently close to $36.5K and Ethereum up by more than 23% jumping from levels close to $1,670 to trade at approximately $2,130.The overall crypto market capitalization currently stands at 1.450 trillion dollars as of 08:40 AM GMT on Friday.
The main highlights for today involve a second speech by ECB President Christine Lagarde at the Financial Times' Global Boardroom, in London, a speech by Deutsche Bundesbank President on the country’s fiscal policy challenges. While the overall stance of central banks has recently shifted towards a less aggressive path forward, global markets still pay close attention to these events for possible hints to cement that expectation.
In other news, UoM Consumer Sentiment and Expectations are also included in today’s calendar while on the earnings front, NIO Inc is due to release its quarterly report after the market closes.
The EUR/USD pair ended the session on Thursday with losses of 0.41%. The EUR/USD turned decisively to the downside following remarks by Federal Reserve Chair Jerome Powell.
European Central Bank (ECB) officials pushed back against some recent dovish market narratives, supporting the Euro. However, the market anticipates the ECB will keep rates unchanged, and the debate centres around when the first-rate cut may occur.
Powell mentioned that the Federal Open Market Committee (FOMC) is not confident that monetary policy is sufficiently restrictive to bring inflation down to 2% over time. He also warned about inflation "head fakes." The US dollar rallied after his remarks, and US bond yields soared.
Gold held on to some gains on Thursday ending the session 0.42% higher after Federal Reserve Chair Jerome Powell reiterated the need for higher interest rates to rein in inflation.
Powell said Fed officials “are not confident” that interest rates are yet high enough to finish the battle with inflation, keeping a less dovish tone and sending the U.S. dollar and Treasury yields higher. Bullion has fallen over $40 after hitting $2,000 last week when escalating tensions in the Middle East boosted safe-haven inflows.
Oil prices rose early on Thursday but did not manage to hold any gains end ended the session almost unchanged by the end of the day.
Crude prices saw a series of steep losses this week, following a string of disappointing economic readings from top importer China, as well as the euro zone. Hawkish signals from Federal Reserve officials also weighed, especially as the dollar rebounded on renewed expectations of U.S. interest rates remaining higher for longer. Fed Chair Jerome Powell reiterated this outlook when speaking on Thursday, and warned that rates had more room to rise.
U.S main indexes ended the session with losses on Thursday after Federal Reserve chairman Jerome Powell dealt a blow to bets on sooner rather later rate cuts after signalling that the Fed isn't ready to close the curtain on rate hikes.
The Federal Open Market Committee are "not confident" that it has tightened policy to sufficiently restrictive stance needed to bring inflation back to Fed's 2% target, Powell said on Thursday. Treasury yields held onto gains, with the yield on the 2-year Treasury rising about 12 basis points to 4.64%.
The US 500 ended the session with losses of 0.74% while US 30 and US Tech 100 ended the day with losses of 0.59% and 0.82% respectively.
Ahead in Friday's session, investors will be watching for the Michigan consumer sentiment and expectations surveys as well as speeches from Daly, Bostic, and Logan.
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