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The dollar showed little change against most major currencies on Friday, with the dollar index (USDX) ending the week moderately higher. Investors remain on the sidelines waiting for January's Consumer Price Index (CPI) reading of inflation, to set the direction for the dollar on Tuesday. Data is expected to show a drop in inflation, with the core CPI remaining well above the Federal Reserve’s 2% annual target.
According to CME’s FedWatch tool, the likelihood of a rate cut in March slipped to 17.5%, about half expectations of 36.5% seen a week ago, while chances for the first rate hike taking place in May are at 53.6%.
The main US stock indices surged for yet another week, with the US 500 that reflects the future of the S&P 500 posting a new record high, closing above 5,000 for the first time. This marks a fifth consecutive week in positive territory for the three main averages and the 14th weekly rise in 15. In corporate news, Nvidia jumped by another 2.1% to hit a new record high and lift its value to around $1.77 trillion, right below the $1.8 trillion value of online retail giant Amazon. PepsiCo’s reported lower revenue despite an increase in prices, indicating that consumers are becoming more hesitant after years of food price inflation. The revenue drop was the first year-on-year decline since the coronavirus pandemic lockdowns in 2020.
Later today, avis budget group and zoominfo report their quarterly earnings, while other key reports due this week include, Robinhood, Coca Cola, AIG, Lyft, Airbnb, Cisco, Jumia and Coinbase
Energy prices rose sharply last week, with the two main benchmarks WTI and Brent gaining by more than 6% on concerns for broadening of the Middle East conflict after Israel rejected a ceasefire offer from Hamas. Key data is due later this week as OPEC will release its monthly report on Tuesday, while the International Energy Agency will release its monthly report on Thursday.
Some price action could be observed today upon a speech by BOE governor Bailey, while later this week the focus could be shifted towards U.S. inflation data (CPI) that could shed some light on the possibility for a rate cut in March.
The EUR/USD pair closed the fourth consecutive day in positive territory on Friday but was virtually unchanged for the week.
German inflation figures brought nothing new to the table, confirming initial flash prints, and an adjustment by the US Bureau of Labor Statistics (BLS) made anticipated changes to how seasonal adjustment is calculated in US Consumer Price Index (CPI) figures. Germany’s final Harmonized Index of Consumer Price (HICP) showed no changes from preliminary prints, with the annualized German inflation rate through January holding at 3.1%.
Over the weekend, European Central Bank ECB Governing Council member Fabio Panetta argued that the time for an interest rate cut was fast approaching. "Any speculation on the exact timing of monetary easing would be a sterile exercise," Panetta added.
Gold slipped on Friday and was heading for a weekly fall, pressured by elevated Treasury yields, while investors awaited next week's U.S. inflation data for more clues on the timing of the Federal Reserve's interest rate cuts.
Benchmark 10-year U.S. Treasury yields rose to a two-week high, and two-year yields hit an almost two-month high, making non-yielding bullion less attractive for investors.
Revised government data showed on Friday that U.S. monthly consumer prices rose less than initially estimated in December. Market participants now await U.S. consumer price index (CPI) for January, due on Tuesday.
Oil prices settled higher on Friday, up about 6% on a week-on-week basis, as worries about supply from the Middle East mounted and as reining outages tightened refined products markets.
Oil futures rose throughout the week, buoyed after Israeli Prime Minister Benjamin Netanyahu's rejection of a Hamas ceasefire proposal on Wednesday.
Crude futures were also supported by strength in gasoline and diesel prices as significant U.S. refinery downtime, both planned and unplanned, tightened product markets.
U.S. stocks were mixed after the close on Friday, as gains in the Technology, Consumer Services and Utilities sectors led shares higher while losses in the Oil & Gas, Consumer Goods and Healthcare sectors led shares lower. At the close the US 30 lost 0.12%, while the US 500 added 0.56%, and the US Tech 100 added 0.95%.
Big tech continued to add to recent gains, with Google, Apple, and Microsoft in the ascendency as the latter's market capitalization of $3.125 trillion topped the record of $3.081T previously set by Apple.
PepsiCo reported mixed-quarter results and cut its guidance as the food and beverage pricing power wanes and volumes come under pressure.
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