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The U.S. dollar index (USDX) traded moderately lower on Friday, ending the session down by 0.50%, crossing right below the 104.0 mark. Some price action was observed after the release of U.S building permits that showed a marginal increase in October briefly supporting the dollar, however, softer than expected inflation data released earlier in the week still seem to be at play, favouring a possible monetary easing scenario for the near future.
According to the CME Group Fed Watch Tool, the possibility that rates will remain unchanged in December rose once again to 100% on Monday, from 99.8% on Friday while the likelihood of a rate hike is at 0%.
The main U.S. stock indices showed little to no change on Friday, with the US 500 up by 0.08, the US 30 down by 0.03%, and the US tech 100 posting a mere 0.07% increase. Market activity appears subdued in anticipation of more clues from the Federal Reserve this week, while key data are also due in the technology sector as NVIDIA reports quarterly earnings on Tuesday.
In other news an interest China injected about 80 billion yuan of liquidity into markets and the PBOC held its benchmark loan rate near record lows on Monday. Nonetheless, Chinese officials pledged to provide support to the country’s property sector thus boosting optimism in of China’s biggest industries.
Focus now shifts to the upcoming minutes of the Fed’s October meeting for more cues on monetary policy. Rates were left unchanged during the meeting, and officials reiterated plans to keep rates higher for longer. In addition, currency market trading volumes expected to be limited this week, due to the upcoming Thanksgiving holiday.
Among the main highlights for Monday are German producer prices as well as a speech by BOE Governor Andrew Bailey. On the earnings front, Zoom is scheduled to release its quarterly report on Monday, while Best Buy, iQIYI, MINISO, Baidu, nVIDIA, Autodesk and Gaotu Techedu will publish their quarterly reports on Tuesday.
The EUR/USD pair rose on Friday and ended the session above the level of 1.0900 ending the week with strong gains of 2.09%.
European Central Bank officials pushed back expectations for early rate hut bets on Friday. Bundesbank President Joachim Nagel said on Friday that it would be unwise to start cutting interest rates too soon. Moreover, ECB policymaker Robert Holzmann argued that the second quarter was simply too soon for a rate cut. European finalized CPI printed as expected early Friday, with October's month-on-month showing a 0.1% increase and the annualized number coming in at 2.9%.
US Building Permits rose in October to 1.487 million, beating the forecast of 1.45 million. October Housing Starts added 1.372 million residential units compared to September's 1.346 million.
Gold prices ended the session on Friday with minor losses but ended the week with total gains of 2.31% as the dollar and Treasury yields weakened amid growing expectations that the U.S. Federal Reserve is done with its monetary policy tightening.
A weaker dollar helped commodity prices across the board, as a string of weak labour and inflation readings over the past week saw traders betting that the Federal Reserve was done raising interest rates.
Oil prices surged Friday, but that proved too little too late to avert a fourth-weekly slump as growing global supply and cooling demand worries muddy sentiment ahead of the OPEC meeting this week. U.S. sanctions on some Russian oil shippers lent support for the prices on Friday. Despite that both contracts ended the week with losses mainly by a bigger-than-expected build in U.S. oil inventories, coupled with record-high production levels, stoking concerns about oversupply.
Focus is now squarely on an upcoming OPEC meeting on November 26, where traders will be looking to see if Saudi Arabia, principally, and Russia roll over their voluntary supply cuts into 2024.
Wall Street's three major indexes ended almost flat on Friday as investors digested recent gains while remarks from Federal Reserve officials clouded the outlook about when the U.S. central bank might start cutting interest rates.
On the earnings front, Gap delivered earnings for Q3 that markedly beat analyst estimates and cautious guidance into the key holiday season quarter, sending its shares more 30% higher. Ross Stores Inc, meanwhile, surged more 7% after delivering Q3 results that beat on both the top and bottom lines amid improving margins.
Treasury yields resumed their slide, underpinning the broader market move higher, as optimism that the Fed interest rates have peaked continue to support investor sentiment following data earlier this week showing easing inflation.
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