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11/06/2024 - 08:30 UTCThe U.S. dollar traded almost unchanged against other major currencies on Monday, with the dollar index (USDX) trading steadily right above the 105.0 mark as investors remain on the sidelines ahead of key CPI numbers and the Fed monetary policy meeting that could shed some light on the central bank’s plans. Economic data this week could set the direction for the greenback, with the CPI report expected to show inflation remaining well above the Fed’s 2% annual target and combined with recent data indicating strength in employment numbers could push back expectations for a rate cut in the September FOMC meeting.
According to the CME Fedwatch tool, bets for the first rate hike to take place in September stand at 46.7% while for the same scenario to occur in November, bets rose from 46.2 to 47.5%.
After hitting record highs at $2,449.89 a few weeks ago, driven by interest rate cut expectations, central bank buying and geopolitical tensions, gold prices declined sharply last Friday. The precious metal dropped to as low as $2,288 per ounce and continues to trade close to the $2,300 mark as traders look for hints on how the Fed will act in the upcoming meetings. UBS maintains a base case of a rate cut in September, while according to the bank, the Fed could adjust its projections to reflect two rate cuts in 2024, with inflation still moderating,
In corporate news, Apple unveiled a long-awaited AI strategy on Monday, integrating its new "Apple Intelligence" technology across its suite of apps including Siri and bringing OpenAI's chatbot ChatGPT to its device, however, its stock ended the session 2% lower as reports indicate that was not enough to compete with AI market-leader Microsoft.
Some price action could be observed later today, upon the release of UK the claimant count change, the UK unemployment rate and a US 10-year bond auction.
The EUR/USD pair extended its losses on Monday ending the session just above the level of 1,0760.
EU Parliamentary elections hobbled the Euro as bumpy parliament shuffling poses a near-term risk for policymaking, weighing heavily on the Euro. A thin calendar on the EU side except for Final German Harmonized Index of Consumer Prices (HICP) figures early Wednesday leaves the Fiber exposed as broader markets pivot to face the upcoming Federal Reserve (Fed) rate call and an update to the Fed’s own dot plot summary of interest rate projections.
With the Fed’s upcoming update to its interest rate expectations on the docket this Wednesday, investors will be racing to see what Fed policymakers expect looking forward. Wednesday also brings an update to US Consumer Price Index (CPI) inflation.
Gold posted solid gains on Monday, rising more than 0.50% as US Treasury yields climbed. The yellow metal stays on the defensive amid broad US Dollar strength ahead of the release of crucial US economic data.
This week’s inflation report in the US would be crucial. Most analysts estimate inflation to remain at familiar levels, which could reaffirm the Federal Reserve’s (Fed) rhetoric of keeping interest rates “higher for longer.”
Oil prices climbed about 3% to a one-week high on Monday, buoyed by hopes of rising fuel demand this summer despite a stronger U.S. dollar and expectations the U.S. Federal Reserve will leave interest rates higher for longer.
The Fed hiked interest rates aggressively in 2022 and 2023 to tame a surge in inflation. Investor attention now turns to the release of U.S. consumer price index data for May on Wednesday for hints on when the Fed may start reducing interest rates.
The market is also waiting for the conclusion of the Fed's two-day policy meeting on Wednesday, in which the central bank is overwhelmingly expected to hold interest rates steady.
The market is also waiting for monthly oil supply and demand data from the U.S. Energy Information Administration (EIA) and OPEC on Tuesday and the International Energy Agency (IEA) on Wednesday.
U.S. main indexes closed at fresh record highs Monday as technology started the week on front foot just ahead of the Federal Reserve interest rate decision and inflation data due this week.
Apple stock fell nearly 2% even as the tech giant unveiled its foray into artificial intelligence with the launch of AI platform Apple Intelligence at its annual developer conference.
Investors are showing a degree of caution ahead of the conclusion of the latest Fed meeting on Wednesday, where the central bank is likely to keep interest rates unchanged.
Consumer price index inflation data is also due on Wednesday, before the Fed's announcement, and is expected to show inflation remaining comfortably above the central bank’s target range.
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