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23/01/2024 - 09:10 UTCThe dollar posted a moderate decline against most major currencies on Monday, with the dollar index (USDX) trading within a tight range between 103.46 and 102.79 for the past week on the iFOREX Europe platform. Dollar investors remain on the sidelines waiting for fresh catalysts to set the direction for the dollar, with key GDP data and inflation data due later this week.
In other news, the Bank of Japan kept interest rates at historical lows of -0.1% early on Tuesday, and left its monetary policies unchanged, as widely expected. The central bank also slightly lowered its inflation outlook for fiscal 2024, suggesting the policymakers will maintain ultra-easy policies for longer. The yen hit its weakest levels of the past two months against the dollar on Monday, and rose to as high as 148.81, however, following the BOJ monetary policy decision some recovery was observed.
The main US stock market continue to mark new all-time highs daily, with investors now focusing on fourth quarter earnings in the technology sector and the direction of the U.S. dollar. In company news, General Electric, Johnson & Johnson, Procter & Gamble, Halliburton, Verizon, Lockheed Martin, Intuitive Surgical and Netflix publish their quarterly earnings today while later this week, other major players such as Tesla, IBM, Intel, Visa and American Express will also release their quarterly data.
Oil prices surged on Monday, with the two main benchmarks WTI and Brent gaining by almost 2% for the day, as U.S. and British forces carried out a fresh round of strikes on Houthi sites in Yemen. The Houthis on the other hand, who control significant parts of Yemen, have disrupted global shipping through the Red Sea, raising concerns that crude supply to Asia could be impacted.
For Tuesday, some price action could be seen later in the session, upon the release of consumer confidence data from eurozone, the US Richmond Manufacturing index and earnings from some major market players.
The EUR/USD waffled on Monday ending the session 0.13% lower as markets pivot ahead of a slew of central bank rate calls this week, with the European Central Bank (ECB) in particular focus for their monetary policy statement slated for Thursday.
The ECB doesn’t see rate cuts until the summer months at the earliest, and money markets appear set to meet the central bank on something that is approaching middle ground.
On the other hand, market participants are assigning just over 40% probability to a reduction in the Fed's FFTR at the March 20 meeting, according to the FedWatch Tool tracked by CME Group.
Gold prices eased on Monday as investors rolled back expectations of a U.S. interest rate cut at the end of March, with a surge in equity markets further dampening interest in safe-haven bullion. Gold fell about 1% last week, its biggest weekly decline in six, after the U.S. Federal Reserve said it needs to see more inflation data before any rate cut judgment could be made and that the baseline for cuts to start was in the third quarter.
Investors are waiting for the U.S. flash PMI report on Wednesday, fourth-quarter advance GDP estimates due on Thursday and personal consumption expenditures data on Friday for more cues on interest rates.
Oil prices rose about 2% on Monday on concerns over global energy supplies following a Ukrainian drone strike on Russia's Novatek fuel terminal and as extreme cold weather continued to hamper U.S. crude production.
Over 20% of output in the third largest oil producing state remained shut in on Monday after being halved last week by extreme cold weather and operational challenges.
However, gains have been limited by concerns over a near-term slowdown in demand, with signs of a sluggish economic recovery in China being a major point of contention. The world’s largest oil importer saw underwhelming growth in the fourth quarter.
U.S. stocks were higher after the close on Monday, as gains in the Industrials, Telecoms and Financials sectors led shares higher. At the close in NYSE, the US 30 added 0.34% to hit a new all-time high, while the US 500 climbed 0.21%, and the US Tech 100 climbed 0.14%.
Big tech, which have driven the rally in stocks, was mostly higher as investors awaited results from some big names including Netflix , which reports on Tuesday, followed by Tesla on Wednesday, as well as 3M (NYSE:MMM) and Intel.
Top-tier economic data is on the calendar for this week that will likely filter into the Federal Reserve's interest rate decision next week.
Ahead in Tuesday's trade, market participants will be closely monitoring quarterly results from Johnson & Johnson, Procter & Gamble Company, and Lockheed Martin Corporation, while Netflix Inc is set to release its results after the market closes.
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