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03/11/2023 - 08:41 UTCThe dollar posted a moderate decline against most major currencies on Thursday, with the U.S. Dollar index (USDX) down by 0.47% for the day. The dollar was seen rather stable, trading in a tight range between 105.66 and 106.99 over the past week, with analyst opinions being split regarding the direction of the dollar. On the one hand, positive impact on the value of the dollar is deriving from rising treasury yields and safe-haven demand, however, that was somewhat balanced by recent comments from Fed’s chairman Powell, who stated that the current monetary policy is restrictive enough, indicating a possible end to the current rate hike cycle.
According to the CME Group Fed Watch Tool, the possibility that rates will remain unchanged in December at 80.4%, while there is 19.6% chance for a rate hike.
In other news, the Bank of England held interest rates unchanged on Thursday’s monetary policy meeting following in the footsteps of the ECB and the Fed, with BOE rates held at 15-year highs. The main stock index UK 100 that tracks the performance of the FTSE 100 future, surged on Thursday, ending the session 1.34% higher while on the weekly chart it is currently more than 2.5% higher.
European stock markets have also displayed solid performance over the last week, following the lead from Wall Street, as some corporate earnings surprised markets to the upside. The Germany 40 index that mirrors the price of the DAX future is trading 3.8% higher for the week so far, and the CAC 40 is more than 4.4% higher.
A flurry of economic events is due on Friday, including among others, unemployment rates from the UK, the eurozone and the U.S., Final Services PMI from the U.K. and the U.S. and the ISM Services PMI form the U.S. The main highlight for Friday is the Non-Farm Payrolls report due from the US later in the day, as it could provide further signs on the resilience of the U.S. economy.
The EUR/USD pair rose on Thursday end ended the session above the level of 1.0600.
On Thursday, the US weekly Initial Jobless Claims rose to the highest level in seven weeks, coming in at 217,000 from 212,000 in the previous reading, higher than the 210,000 estimated. Meanwhile, the Unit Labor Cost for the third quarter dropped by 0.8% from a rise of 2.2% in the previous reading, worse than the expectation.
On the Euro front, HCOB's final Eurozone Manufacturing PMI dropped to 43.1 in October from September’s 43.4, above the first estimation of 43.0.
Looking ahead, market participants will monitor the Eurozone Unemployment rate and the US employment data, including Nonfarm Payrolls and Average Hourly Earnings. Also, the US ISM Services PMI will be due later on Friday.
Gold prices remained unchanged on Thursday as the U.S. dollar and Treasury yields retreated on raised bets that the Federal Reserve may be done raising interest rates, while investors awaited U.S. non-farm payrolls data for further cues.
Data showed U.S. weekly jobless claims rose moderately as the labor market continued to show few signs of a significant slowdown. The market now sees an 80% chance of another Fed pause in December, according to the CME FedWatch Tool Investors will also monitor the U.S. non-farm payrolls report due on Friday for further cues on the U.S. central bank’s policy path.
Oil prices gained more than $2 a barrel on Thursday, breaking a three-day declining streak as risk appetite returned to financial markets a day after the U.S. Federal Reserve kept benchmark interest rates on hold. According to analysts The Fed’s decision to keep interest rate hikes on pause for a second consecutive time has bolstered economic sentiment and supported commodity prices.
Investors will also be watching for developments in the Middle East, which has kept oil markets on edge as a wider conflict could disrupt oil supplies around the region.
Wall Street's three main stock indexes rose on Thursday on hopes that the U.S. Federal Reserve has reached the end of its interest rate hiking campaign and a batch of upbeat quarterly financial updates added to the bullish mood. US 500 and US 30 rose 1.45% and 1.53% respectively, while US Tech 100 added gains of 1.02%.
The Fed held interest rates steady on Wednesday as expected, and while Chair Jerome Powell left the door open to further tightening, he also acknowledged the impact of a recent surge in bond yields on the economy.
Ahead in Friday's trade, focus will be on the monthly nonfarm payrolls report and average hourly earnings data as well as a speech from Fed Vice Chair for Supervision Barr.
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