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24/01/2024 - 08:28 UTCThe dollar ended in positive territory against most major currencies for yet another session on Tuesday, with the dollar index (USDX) breaking above the tight range of 102.79 and 103.46 seen in the past week, to touch levels last seen on December 12th. No significant move has been observed in the dollar so far this week as markets anticipate a key GDP report and inflation data due later this week to assess resilience in the US economy and whether the long-awaited Fed rate cuts will be pushed back further.
According to the CME Fedwatch tool, the markets price in a 48.1% possibility that the 1st rate cut in 2024 will take place in the March FOMC meeting, while the possibility for an additional rate hike taking place in May is at 34.9%.
Positive sentiment in Wall Street continues to bloom, with all three main stock market indices posting fresh all-time highs on Tuesday, supported primarily by large market capitalization companies. Investors’ focus is now shifted to fourth quarter earnings, with results seen so far being encouraging. Netflix reported some impressive fourth-quarter financials, and a solid outlook as its subscribers grew more than anticipated in the fourth quarter and it anticipates hundreds of millions more to subscribe to its service.
Oil prices showed little movement on Tuesday, with the two main benchmarks WTI and Brent ending the session almost unchanged, as U.S. crude inventories fell more than expected last week, according to the API report. The bigger than expected decline in weekly U.S. stockpiles followed weather-related supply disruptions, with a decline in North Dakota production, the third largest oil producing state. The official government inventory report from the EIA is due later in the session, and forecasts show a weekly decline in U.S. crude supplies by about 3M barrels.
For Wednesday, some price action could be seen later in the session, upon the Bank of Canada interest rate statement while Flash Manufacturing and Flash Services PMIs are due from France, Germany, the eurozone, the U.K. and the U.S. On the earnings front, AT&T, Abbott, Kimberly-Clark, IBM, Tesla, and CROWN CASTLE publish quarterly results later in the session.
The EUR/USD pair fell to fresh multi-week lows on Tuesday, ending the session with losses of 0.19%.
The continuation of the strong buying bias in the greenback kept the risk appetite subdued and pushed the USD Index (DXY) to a fresh yearly high and at the same time helped by higher US yields. Market participants are likely awaiting the release of the U.S PMI data from the United States on Wednesday.
The Euro (EUR) encountered downward pressure following the preliminary Consumer Confidence released by the European Commission on Tuesday, indicating a decrease in consumer trust regarding economic activity. Market participants will observe the HCOB Purchasing Managers Index (PMI) data from the Eurozone and Germany on Wednesday.
Gold prices inched higher on Tuesday adding 0.42% daily gains as investors awaited a slew of U.S. economic data this week for more cues to the Federal Reserve's timeline for interest rate cuts.
Fed officials last week said the U.S. central bank needs more inflation data in hand before any rate cut judgment could be made and that the baseline for cuts to start was in the third quarter.
Focus this week will be on the U.S. flash PMI report on Wednesday, fourth-quarter advance GDP estimates due on Thursday, and personal consumption expenditures data on Friday.
Oil prices settled lower on Tuesday, as rising supply concerns returned to focus after Libya resumed production at a key oilfield, while a stronger dollar also weighed on sentiment offsetting ongoing geopolitical tensions.
A stronger dollar makes oil, priced in the U.S. dollars, more expensive in other currencies. That weighs on demand, which is already under pressure as rising Covid-19 infections threaten the global recovery.
Providing support for the crude markets remains the volatile situation in the Middle East, potentially hitting output from this oil-rich region.
U.S main indexes posted a mixed picture on Tuesday. At the close in NYSE, the US 30 fell 0.17%, while the US 500 climbed 0.48%, and the US Tech 100 gained 0.64%.
Netflix Inc skyrocketed by 8% after the company reported over 13 million new subscribers in the fourth quarter. The impressive performance of the streaming titan adds to the robust gains of large tech companies in 2024, driving the US 500 to record highs and signalling the onset of a new bull market. Verizon Communications rallied 6.7% after forecasting a strong annual profit and posting its highest quarterly subscriber additions in nearly two years, while Procter & Gamble gained 4.2% after it topped second-quarter profit expectations.
Looking ahead, traders will be turning their attention to U.S. manufacturing and services data for January, as well as the release of the fourth quarter gross domestic product later this week.
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