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31/10/2023 - 09:25 UTCThe U.S. Dollar posted moderate losses on Monday’s session, with the USDX ending the day 0.45% lower, closing in on the 106.0 mark. The moderate decline in the dollar value came as investors are positioning for the upcoming Fed monetary policy meeting due to conclude on Wednesday as well as a series of important economic data releases. According to the CME Group Fed Watch Tool, the possibility that rates will remain unchanged in November is at 98.3% and for December chances are at 74.3%, while there is also a 1.3% chance for a rate cut and a 24.4% chance for a rate hike in December.
In other news, the Bank of Japan left interest rates unchanged at negative levels early on Tuesday. The BOJ also stated it will keep its current pace of asset purchases and quantitative easing to stimulate the economy, underlining the uncertainty that is overwhelming the markets due to high inflation and worsening global economic conditions. The move comes in an attempt of the central bank to support the Japanese economy, while also dealing with high inflation levels.
Oil prices fell significantly on Monday and received further pressure on Tuesday by weaker-than-expected activity data from China indicating slowing fuel demand. The WTI contract fell by more than 2% despite Israel increasing the scale of its ground assault on Gaza, ahead of a series of key fundamental events due later this week and especially the Fed statement due on Wednesday.
The main stock market indices in the U.S. posted a mild recovery on Monday, with the US 500 rising by 0.8%, the US 30 up by 1.43% while the US tech 100 gained 0.46% of its value, ahead of the long-awaited November 1st interest rate statement by the Fed as well as quarterly earnings from Caterpillar and Apple due later this week.
For Tuesday, a flurry of economic data is due to be reported, including among others, the eurozone CPI and GDP, Canadian GDP, the CB Consumer Confidence report, U.S. housing prices and the Chicago PMI index.
The EUR/USD climbed above 1.0600 ending the session with gains of 0.49%, supported by a weaker US Dollar across the board ahead of the FOMC meeting and key jobs data. The Euro also received support from Eurozone economic data.
economic contraction in Germany during the third quarter was milder than expected, with a decline of 0.1% quarter-on-quarter. According to preliminary data, annual inflation in October decreased from 4.5% in September to 3.8%, falling below the expected 4%.
Key US data is due throughout the week, starting with the Employment Cost Index on Tuesday, followed by the ADP private employment report, and culminating with the Nonfarm Payrolls on Friday.
Gold prices stayed close to the $2,000 mark on Monday, buoyed by investors seeking safe-haven assets due to the ongoing conflict in the Middle East and ahead of the U.S. Federal Reserve's policy meeting this week. Gold prices experienced a minor decline of 0.36% and ended the session just below the $2,000 per ounce.
Traders are also keeping an eye on the U.S. central bank’s policy decision due on Wednesday. While the Fed is widely expected to keep interest rates unchanged, the focus will be on Chair Jerome Powell’s commentary.
Crude prices tumbled on Monday as the market looked beyond the war in the Middle East to focus on what the Federal Reserve might do or say at its interest rate decision on Wednesday.
The Fed is widely expected to keep rates on hold this week. But officials have still kept the door open for one more rate hike this year, especially following several hotter-than-expected inflation readings.
But before the Fed meeting, markets are also awaiting key purchasing managers index data from China, which is set to shed more light on business activity in the world’s biggest oil importer.
U.S. stocks were higher after the close on Monday, as gains in the Telecoms, Consumer services and Financials sectors led shares higher.
At the close in NYSE, the US 30 gained 1.43%, while the US 500 index climbed 0.80%, and the US Tech 100 index climbed 0.46%.
McDonald’s Corporation rose more than 2% after the fast-food maker reported quarterly results that beat analyst estimates on both the top and bottom lines as recent price hikes underpinned growth.
Big tech led the broader move higher ahead of quarterly earnings from Apple due later this week, and the Federal Reserve’s interest rate decision slated for Wednesday.
Ahead in Tuesday's trade, market participants will be monitoring CB Consumer confidence, housing price indexes and the Chicago PMI.
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