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29/08/2023 - 08:26 UTCThe U.S dollar posted a small correction on Monday in a rather quiet session in terms of fundamentals, with the USDX ending the day 0.16% lower, dropping right below the 104.0 mark. Small fluctuations were also observed in the dollar against emerging market currencies with the USD/ZAR down by 0.12%, the USD/CNH up by 0.18% and the USD/MXN rising by 0.32%.
Energy prices fluctuated between gains and losses on Monday, with WTI ending the day lower by 0.17% while Brent fell by 0.51% on the iFOREX platform. The impact from Powell’s latest comments indicating that further rate hikes are yet to come, seems to have raised concerns on global growth and potential demand for energy. Energy traders will possibly wait for key U.S. economic data due later this week that could help determine the path of interest rates this year and the next.
Positive sentiment is surrounding European markets on Monday, following a solid performance from the main US stock indices on Monday, with gains spilling also into Asian equities. The US 500 was up by 0.49%, the US 30 rose by 0.48% and the US tech 100 was seen 0.58% higher.
In Asia, price reaction was even more intense, with the China A50 rising by 1.85% for the day, the Hong Kong 50 up by 2.27%, the Nikkei 225 posting an increase of 1.11%. In China, Chinese purchasing managers’ index data are also due on Thursday and Friday, as investors look for indications of where business activity stands in the world’s largest oil importer.
Following the latest hawkish fundamentals such as rising bond yields and comments from the Federal Reserve's Jerome Powell that signalled further rates hikes are still on the table, investors now look for possible signs of softening in the Fed’s monetary policy planning. On Tuesday, attention could possibly shift to key US reports U.S. such as the annual housing price index S&P/CS as well as CB Consumer confidence data and the JOLTS job openings report. Later in the week, the focus could turn to preliminary GDP and Pending home sales on Wednesday, the Fed’s favourite inflation gauge, the monthly Core PCE Price Index due on Thursday and finally the Non-Farm Payrolls report on Friday.
The EUR/USD pair posted moderate gains on Monday amid a softer US Dollar, after the lowest daily close since middle June on Friday following Powell’s speech at Jackson Hole.
The US Dollar weakened at the beginning of the week, possibly due to an improvement in market sentiment, supported by additional measures from China. Retreating US bond yields and a positive risk tone also turned out to be key factors weighing on the US Dollar.
The focus now turns to upcoming US employment and inflation data. Later today, the JOLTS Job Openings report and the German Gfk Consumer Confidence survey are scheduled to be released.
Gold prices edged higher on Monday, helped by a retreat in the dollar and bond yields, while investors awaited a slew of U.S. economic data this week for more clues on interest rate outlook. Gold closed the session on Monday just above the level of $1920.00 per ounce with 0.32% total daily gains.
The dollar eased against rivals, making gold less expensive for other currency holders. Focus this week will on the U.S. personal consumption expenditures price index report due on Thursday and the August nonfarm payrolls data on Friday for more clarity on the economy’s strength.
Oil prices posted minor losses on Monday, pressured by worries that further U.S interest rate hikes could dent demand but supported by the potential of a supply disruption from a tropical storm off the U.S. Gulf Coast. Saudi Arabia is expected to extend a voluntary oil output cut of 1 million barrels a day into October in order to offer further support to the market.
Personal consumption expenditures price index, the Fed's preferred inflation gauge, is set for release on Thursday and non-farm payrolls data is due on Friday.
All three major stock indexes rose as investors digested last Friday's comments from Fed Chair Jerome Powell that the U.S. central bank may need to raise interest rates further to ensure inflation is contained. The US 500 and US 30 gained 0.49% and 0.48% respectively while US Tech 100 rose 0.58%.
3M Company closed more than 5% as it closes in on a more than $5.5 billion deal to settle over 300 lawsuits, alleging that the company sold the U.S. military defective earplugs.
Ahead in Tuesday's trade, investors will be closely monitoring CB Consumer confidence, JOLTs Job openings, and house price index data, as well as earnings from HP Inc, Bank of Montreal , Hewlett Packard Enterprise Co , and Best Buy Co Inc.
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