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05/02/2024 - 09:05 UTCThe dollar gained against most major currencies on Friday, with the dollar index (USDX) trading near two-month highs as strong data reported by the US employment sector and recent comments from Feds president lower expectations for an early rate cut. Fed Chair Jerome Powell spoke on CBS 60 Minutes on Sunday, stating that resilience in the U.S. economy gave the Fed more headroom to keep monetary policy steady for the time being. He also pointed out that any potential rate cuts will be data driven.
According to the CME Fedwatch tool, the markets price in a 13.5% possibility that the 1st rate cut in 2024 will take place in the March FOMC meeting, while the same possibility for a rate hike taking place in May is at 55.2%.
Another week ended in positive territory with all three main stock indices hitting new all-time highs following a robust jobs report and solid earnings reports from tech giants Microsoft Corporation and Meta Platforms Inc. The positive momentum overshadowed Federal Reserve Chair Jerome Powell's comments last Wednesday where he downplayed the scenario for early rate cuts.
Fourth quarter earnings are now in focus, with some major market players publishing their quarterly results later today, among which are McDonald's Caterpillar, Palantir Technologies, and Chegg. Other key earnings reports are due later this week by Spotify, Snapchat, Disney, Paypal, Wynn Resorts, Expedia and Pepsi co.
On the energy front, the two main benchmarks WTI and Brent posted another sharp decline on Friday, ending the week lower by more than 7.5%. Part of the move is attributed to a stronger dollar as well as easing concerns over possible supply disruptions, as optimism looms over an extended ceasefire in the Israel-Hamas war.
Some price action could be observed later in the day upon the release of the Sentix Investor Confidence, the ISM Services PMI and a speech by Fed Chair Powell.
The EUR/USD pair posted a sharp decline on Friday ending the session 0.74% lower after the release of US nonfarm payrolls boosted the US Dollar.
US Nonfarm Payrolls wildly outperformed market expectations, hitting a one-year high and bringing sharp upside revisions to previous datapoints. Investors hoping for faster, sooner rate cuts from the US Federal Reserve (Fed) have seen rate cut hopes dwindle as the US domestic economy continues to surprise with its sturdiness. Meanwhile, the Unemployment Rate was unchanged at 3.7%. Finally, wage growth is firming, with Average Hourly Earnings climbing 4.5% YoY in January from the previous reading of 4.4% in December.
Market participants will keep an eye on the German Trade Balance and the January HCOB Composite PMI from Germany, the Eurozone and Spain. On the US docket, the ISM Services PMI will be due.
Gold prices slipped on Friday as the dollar and yields jumped after a strong U.S. nonfarm payrolls report which created some uncertainty about whether the Federal Reserve might start cutting interest rates soon.
U.S. employers added 353,000 jobs in January, beating the 180,000 economists had expected.
According to the CME Fed Watch, opens new tab Tool, traders now expect about a 70% chance of a U.S. rate cut in May, compared to 92% before the data. Lower interest rates boost non-yielding bullion's appeal.
Oil prices fell by about 2% on Friday and posted weekly losses after U.S. jobs data shrank the odds of imminent interest rate cuts in the world's largest economy, which could dampen crude demand.
Faltering growth in China and the possibility of some easing of tensions in the Middle East also reduced prices.
The weekly loss for oil prices was already in motion after unsubstantiated reports of a ceasefire between Israel and Hamas caused prices to settle more than 2% lower on Thursday.
U.S. stocks ended sharply higher on Friday and the US500 registered an all-time closing high as strong earnings and a blowout January employment report boosted confidence in the economy, even while lowering the likelihood that the Federal Reserve will cut interest rates any time soon. The US 30 added 0.34%, while the US 500 climbed 0.52% and the US Tech 100 gained 0.79%.
Meta Platforms stock rose 20% as the tech giant declined its first dividend and rolled out additional $50 billion in share buybacks after quarterly profit at the Facebook parent tripled from a year earlier. Amazon.com Inc jumped more than 7% after its fourth-quarter results topped Wall Street estimates as cloud growth and strength in e-commerce bolstered performance.
This week more earnings reports are due, with McDonald’s Corporation set to announce on Monday and Forward Industries Inc on Tuesday.
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