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14/11/2023 - 09:13 UTCThe U.S. dollar index (USDX) traded almost unchanged for yet another session on Monday, ending the session 0.09% lower, closing in on the 105.0 mark. Market activity seems to be settling down early today as investors are waiting for U.S. consumer price data to be released, in hopes that it could shed some light on what the path forward is for the Federal Reserve. Policymakers have kept the option of further rate hikes on the table after the central bank held interest rates unchanged at its last meeting.
According to the CME Group Fed Watch Tool, the possibility that rates will remain unchanged in December fell from 91.2% on Monday to 85.7% on Tuesday, with there is a 14.3% chance for a rate hike.
Despite a downgrade of the U.S. credit rating outlook by Moody's late Friday the main stock market indices in the U.S. posted moderate gains on Monday, supported by the energy and healthcare sectors. The US 500 ended the session 0.15% higher, the US 30 was up by 0.32% and the US tech 100 was almost unchanged. Part of the focus now shifts to upcoming inflation data from the U.S. as well as the Nov. 17 deadline for Congress to pass a funding bill to keep the government open.
The main highlight for Tuesday is the October CPI data from the U.S. where Inflation is expected to have slowed to a 0.1% pace monthly, and be at 3.3% on an annual basis, from 0.4% and 3.7% respectively.
Other news for today include the German ZEW economic sentiment report and growth data from the eurozone third-quarter GDP release, due later in the session, which are expected to show that the bloc’s economy is struggling under the weight those interest rate increases. On the earnings front, Tencent Music Entertainment, HUYA Inc and Sea Ltd are due to release their quarterly reports.
The EUR/USD rose on Monday ending the session 0.10% higher, driven by a weaker US Dollar and a decline in US yields. Market focus now shifts to upcoming economic data releases from both the US and the Euro area.
During a relatively quiet day, the US Dollar weakened as US yields pulled back and risk appetite increased. The key focus is on the US Consumer Price Index (CPI) report scheduled for release later today.
If US inflation accelerates, it could raise the likelihood of another interest rate hike by the Federal Reserve, leading to higher yields and a stronger US Dollar. Eurostat will release employment and growth data from the third quarter. The economy is expected to have contracted by 0.1%. Additionally, the ZEW survey results are also due.
Gold prices ticked higher as the dollar eased on Monday, while investors looked toward key U.S. inflation data due this week that could throw some light on the Federal Reserve’s interest rate stance.
Bullion dipped 3% last week as safe-haven demand driven by the conflict in the Middle East eased, while Fed Chair Jerome Powell struck a hawkish tone.
U.S. consumer prices index (CPI) data will be released later today. Traders will also scan the U.S. producer price index data due on Wednesday.
Oil prices rose on Monday after OPEC's monthly market report eased worries about waning demand and a U.S. probe into suspected violations of Russian oil sanctions raised concerns about potential supply disruptions.
In a monthly report, OPEC said oil market fundamentals remained strong and blamed speculators for a drop in prices. OPEC made a slight increase to its 2023 forecast for global oil demand growth.
Moreover, market participants focus will turn to U.S. CPI as hawkish signals from Federal Reserve officials have boosted the dollar of late, weighing on the crude market as a stronger U.S. currency makes the commodity more expensive for foreign buyers.
US main indexes traded in a tight range on Monday with US 500 and US 30 adding some daily gains while US Tech 100 ended the day almost unchanged.
The earnings season is approaching the end, but several big-box retailers are set to unveil their latest quarterly results this week, Home Depot is due to report ahead of the opening bell today, followed by Target on Wednesday, while earnings from Walmart and Macy’s are scheduled to be released on Thursday.
Ahead in Tuesday's trade, market participants are expecting the annualized US CPI data to come in at 3.3% versus 3.7% in the previous month. Traders will also be monitoring small business optimism data released in the morning and comments from several Federal Reserve officials throughout the day. Additionally, the earnings report from Home Depot Inc will be a notable focus for traders.
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