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10/09/2024 - 06:46 UTCThe dollar gained moderately for a third consecutive session on Monday, recovering from monthly lows seen last week, with the dollar index (USDX) closing 0.43% higher. Investors will most likely be watching closely on this week's U.S. inflation data for more guidance on the potential size of an interest rate cut by the Federal Reserve later this month. Cooling inflation could boost bets on lower rates, benefiting equities and dollar-denominated commodities. The inflation report on Wednesday precedes a Federal Reserve meeting, where a 25 basis point interest rate reduction is widely anticipated.
According to the CME's FedWatch tool, the market is currently pricing in a 71% chance of a 0.25% interest rate reduction by the Federal Reserve in September. While a larger cut of 0.5% is seen as less likely at 29%, there is still a significant probability of further easing in November, with odds currently standing at 52.1%.
United States stock index futures traded within a narrow range during evening sessions on Monday, following a recovery from the previous week's losses. The upcoming inflation data is anticipated to provide additional insights into interest rate policy that could determine price action.
In corporate news, Apple Inc unveiled its latest iPhone model and while the new devices feature a range of innovative artificial intelligence capabilities, which are anticipated to bolster sales, Apple's shares experienced minimal movement. Analysts expressed concerns regarding the company's phased implementation of AI features. Conversely, Arm Holdings' shares appreciated by 1% in after-hours trading following a 7% surge during the session, as Apple announced that the chips powering its flagship devices will be based on Arm architecture.
Within the energy sector, the two principal crude oil benchmarks, West Texas Intermediate (WTI) and Brent, exhibited minimal fluctuation on Monday, following a recovery from substantial losses incurred during the preceding week. Prices were subjected to downward pressure due to renewed concerns that global oil demand will slow, especially following middling economic readings from top importer China.
A series of key economic reports are due this week including among others the U.S CPI and PPI numbers, an interest rate statement by the ECB and growth data from the UK.
The EUR/USD continued its downward trajectory on Monday ending the session 0.46% lower, driven by expectations that the European Central Bank (ECB) will cut interest rates by 25 basis points at its September 12 meeting.
Market sentiment remains cautious as many analysts predict the ECB will lower rates in response to economic headwinds. In line with this outlook, money markets are pricing in a potential 50 to 75 basis points in rate cuts by the ECB before the end of the year. Key Eurozone data this week includes German inflation figures on Tuesday and Eurozone industrial production data on Friday.
Across the Atlantic, market participants await this week's U.S. Consumer Price Index (CPI) report. If inflation eases further, it could increase the likelihood of a larger rate cut by the Fed.
Gold prices posted minor gains on Monday, with investors closely watching upcoming U.S. inflation data for insights into the Federal Reserve's next move on interest rates.
Traders currently estimate a 73% chance of a 25-basis-point rate cut at the Fed's meeting next week, with a 27% likelihood of a larger 50-basis-point reduction, according to the CME FedWatch Tool.
Investors are now turning their attention to the August U.S. Consumer Price Index (CPI) report due Wednesday, followed by the Producer Price Index (PPI) on Thursday.
Oil prices climbed about 1% on Monday, driven by concerns over a potential disruption in production and refining as a hurricane is forecast to hit Louisiana later this week.
U.S. oil and gas producers along the Gulf Coast began evacuating workers and scaling back drilling operations as Tropical Storm Francine advanced across the Gulf of Mexico. The U.S. National Hurricane Center forecasts that Francine will strengthen into a hurricane by Tuesday, potentially impacting the Louisiana coastline, a region responsible for about 50% of the country’s refining capacity, according to the U.S. Energy Information Administration (EIA).
U.S main indexes surged on Monday, recovering from its steepest weekly decline since 2023, as investors digested Apple’s latest lineup of AI-driven iPhones and prepared for key inflation data later this week.
Apple Inc. closed flat on Monday, failing to participate in the tech sector's rally despite unveiling its new iPhone models and generative artificial intelligence software, Apple Intelligence.
Investors are turning their attention to key U.S. inflation data due later this week. The Consumer Price Index (CPI) for August will be released on Wednesday, followed by the Producer Price Index (PPI) on Thursday.
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