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05/04/2024 - 07:39 UTCFollowing two consecutive daily declines, the US dollar fluctuated between gains and losses against most major currencies on Thursday, with the dollar index (USDX) ending the session unchanged close to two-week lows. Hawkish comments from Fed officials seem to limit the decline in the U.S. currency as Minneapolis Fed President Neel Kashkari said rate cuts might not be required this year if inflation continues to stall. In addition, Richmond Fed President Thomas Barkin said that inflation data at the start of this year has not been so encouraging questioning whether the economic outlook has improved.
Investors appear on edge, in light of the key employment releases due later in the session, that could shed some light on the Fed’s monetary policy planning. According to the CME Fedwatch tool, bets for a June rate cut fell slightly below the 60% level, while reports indicate that a weak non-farm payrolls report could amplify those chances.
In Wall street, sentiment has taken a hit by ¬¬rising geopolitical tensions and hawkish remarks from Federal Reserve officials right before the release of crucial employment data due later in the session. All three main stock indices plummeted, amid fears skirmishes between Israel and Iran are set to escalate and as Fed officials call for further delays on rate cuts.
In corporate news, Conagra Brands jumped 5% after the packaged goods food company raised its full-year adjusted operating margin outlook amid better-than-expected quarterly results as increased marketing efforts boosted sales.
For Friday, some price action could be observed upon the release of UK construction PMI, eurozone retail sales and Canada’s employment change while the main focus is on US unemployment data and the long-awaited non-farm payrolls report, where economists expect 200,000 jobs to be added in March.
The EUR/USD pair ended the session on Thursday almost unchanged ending the session above the mark of 1.0830.
US Initial Jobless Claims for the week ended March 29 increased by 9,000 to 221,000. Additionally, US Challenger Job Cuts for March stood at 90.309K, exceeding the previous reading of 84.638K.
On the other side, the Eurostat Producer Price Index (PPI) recorded a decline of 1.0% in February, surpassing both the expected and previous decreases of 0.7% and 0.9%, respectively. On a year-over-year basis, the index fell by 8.3%, slightly lower than the anticipated 8.6% decrease but higher than the 8.0% decline seen previously. Recent data indicates that the annual inflation rate in the Eurozone declined more than anticipated in March.
Market participants turn their focus to Germany’s Factory Orders and Eurozone Retail Sales on Friday. From the United States, Average Hourly Earnings and Nonfarm Payrolls are scheduled to be eyed.
Gold prices retreated on Thursday after hitting an all-time high earlier in the session on expectations for lower U.S. interest rates this year, as investors await more clarity on the timing of the cuts.
Data on Thursday showed the number of Americans filing new claims for unemployment benefits increased more than expected last week as labor market conditions gradually ease.
Focus now shifts to U.S. March non-farm payrolls due on Friday which could shed more light on the timing of the Fed's first rate cut.
Oil prices settled higher Thursday, as the threat of potential supply disruptions continue to dominate investor attention as geopolitical tensions in the Middle East flare amid fears an Iran retaliatory strikes against Israel could be imminent.
Israel Security Cabinet met Thursday on concerns that an Iranian response to Israel's alleged attack on its diplomatic consulate in the Syrian capital, Damascus could be imminent. On the Russia-Ukraine front, attacks on key Russian refineries heralded more supply disruptions for Moscow.
Crude prices were also cheered by improving economic conditions in top importer China, following a string of positive purchasing managers index readings for March.
The three major U.S. stock indexes fell more than 1% on Thursday with the US 500 ending the session 1.48% lower while US 30 and US Tech 100 retreated 1.51% and 1.93% respectively as Federal Reserve officials took a cautious approach in comments on the outlook for interest rate cuts, and investors braced for Friday's U.S. monthly jobs report.
Among the comments by Fed officials, Minneapolis Fed Bank President Neel Kashkari said that at the U.S. central bank's meeting last month he pencilled in two rate cuts this year but that if inflation continues to stall, none may be required this year. Earlier on Thursday, Richmond Fed President Thomas Barkin said the U.S. central bank has "time for the clouds to clear" on inflation before starting to cut rates.
Markets were now awaiting nonfarm payrolls data for March, due on Friday, for more cues on a potentially cooling labor market.
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