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14/03/2024 - 08:38 UTCThe US Dollar traded moderately lower on Wednesday, with the dollar index (USDX) ending the session down by 0.11%. Dollar traders are shifting their focus on upcoming producer inflation and retail sales data due later in the day, seeking for more cues regarding the timing of the first rate cut by the Fed, especially after higher-than-expected inflation data reported earlier this week. The PPI report is expected to show that the core monthly PPI fell to 0.2% in February, from 0.5% seen in January while monthly retail sales are expected to increase by 0.5% following a 0.6% decline the month before.
According to the CME Fedwatch tool, markets are pricing in a 60% chance of a 25 basis point cut in June while bets for an additional rate cut in July are currently at 34.2%.
In other news, gold prices recovered most of the losses seen in the previous session, with the yellow metal closing in on record highs seen last week at $2,195 per ounce on hopes that next week’s Fed meeting will provide some hints as to the direction of the market and the timing of the long-awaited rate cuts. Several Fed officials had warned that interest rate cuts will be largely dictated by the path of inflation in the coming months.
Sentiment in Wall Street remains positive on Wednesday, with Energy stocks leading the way as shares of Valero and several other energy corporations such as Marathon and APA posted solid gains driven by an increase in oil prices and an unexpected decline in weekly U.S. inventories. Tesla shares were down by 4% for the day, after Wells Fargo downgraded the credit rating of the EV company to the equivalent of a sell rating calling the company a “growth company with no growth”. In the meantime, Intel Corporation, ended 4% lower pressured by reports that the Pentagon withdrew plans for a $2.5 billion grant for the company.
In today’s session, some price action could be observed upon the release of monthly U.S. PPI and Core PPI, monthly U.S. retail sales and weekly jobless claims.
The EUR/USD pair ended the session on Wednesday with solid gains of 0.24% amid a softer US Dollar and high US Treasury bond yields.
An absent economic docket in the US, left market participants adrift to Eurozone economic data and European Central Bank (ECB) speakers. Considering the broader macroeconomic landscape, both the Federal Reserve and the European Central Bank are anticipated to initiate their easing cycles early in the summer, likely in June.
On the ECB front, board member Villeroy suggested a potential rate cut in spring, stating the Governing Council will maintain vigilance until the 2% inflation target is reached.
Focus now turns on more inflation cues from producer price index and retail sales data.
Gold prices rose on Wednesday adding gains of 0.85%, buoyed by a weaker dollar, as market participants held on to hopes of a June rate cut by the Federal Reserve despite a hot U.S. inflation print, while escalating geopolitical tensions kept bullion's safe-haven demand intact.
Bullion prices had surged to record highs of around $2,200 an ounce at the beginning of the week but saw a sudden freezing after hotter-than-expected consumer price index data put fears of high interest rates back into markets. Focus is now on U.S. retail sales, the producer price index, and the weekly initial jobless claims, all of which are due on Thursday.
Oil prices rose more than 2% to a four-month high on Wednesday on a surprise withdrawal in U.S. crude inventories, a bigger-than-expected drop in U.S. gasoline stocks and potential supply disruptions after Ukrainian attacks on Russian refineries.
The U.S. Energy Information Administration (EIA) said energy firms pulled a surprise 1.5 million barrels of crude from stockpiles during the week ended March 8.
In Russia, Ukraine struck oil refineries in a second day of heavy drone attacks, causing a fire at Rosneft's biggest refinery.
U.S. stocks were mixed after the close on Wednesday, as gains in the Oil & Gas, Basic Materials and Utilities sectors led shares higher while losses in the Technology, Healthcare and Consumer Goods sectors led shares lower.
Energy stocks were the biggest gainers, led by Valero Energy Corporation, Marathon Petroleum Corp, APA Corporation, driven by a jump in oil prices after an unexpected decline in weekly U.S. inventories. Shares of Tesla Inc fell over 4% Wednesday after Wells Fargo downgraded the EV giant to the equivalent of a sell rating calling the company a "growth company with no growth."
Ahead of the Fed's meeting next, investors will assess the producer price index data and retail sales data for February due later today, for further clues on inflation and the strength of consumer spending, respectively.
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