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24/05/2024 - 08:27 UTCThe U.S. dollar saw another session of small gains on Thursday, with the dollar index (USDX) adding another 0.09% to its value closing the day right below the 105.0 mark. The move was partly attributed to a report showing that U.S. business activity accelerated to the highest level in more than two years in May, indicating that economic growth picked up half-way through the second quarter.
Following recent developments pointing to a more hawkish stance on behalf of the Fed, expectations for the first rate reduction have shifted from September to November with CME Fedwatch tool showing bets for September dropping from 49.7 to 46.6% while November stands at 46.5%.
On the energy front, the two main benchmarks WTI and Brent are still on a descending slope, though downwards momentum appears to be losing steam ahead of the OPEC+ meeting on June 1st where voluntary output cuts will be discussed. On another note, U.S. gasoline demand strengthened, lending some support to the sector ahead of the Memorial Day holiday weekend, which is considered the start of the U.S. summer driving season.
Among cryptocurrencies, Bitcoin declined by 1.72% trading close to $68K following a peak of just over 72K reached earlier this week. Ethereum was up 1.21% hitting its highest levels since March on speculation regarding the potential approval of U.S. spot exchange-traded funds that would track its price.
Wall street sentiment took a hit on Thursday, as treasury yields begun to rise on signs of sticky inflation and as expectations for a rate cut are dented offsetting optimism in the tech-sector led by Nvidia. Fresh fears that a strength in the economy could spark a revival in inflation add pressure on the main US indices, with the US 500 and the US tech 100 declining by almost 1% while the US 30 lost 1.5% of its recent gains.
On Friday, some price action could be observed as Fed member Waller holds a speech at an economic conference. Earlier in the session, the US will release data on US durable goods orders along with the University of Michigan report on consumer sentiment and inflation expectations.
The EUR/USD pair ended the session lower on Thursday ending the day 0.12% lower after an unexpected upswing in US Services Purchasing Managers Index (PMI) figures sparked renewed fears of fewer Federal Reserve (Fed) rate cuts. This sent investors into the safe-haven US Dollar and deflated the Euro despite better-than-expected PMI figures earlier in the day.
European and US PMI figures on Thursday both beat market expectations, with figures broadly printing above expectations and improving on previous figures, but a higher-than-forecast upswing in US Services PMIs from 51.3 to 54.8 pummelled broad-market expectations for a Fed rate cut in September.
Friday brings a Gross Domestic Product (GDP) update for Germany and the US Durable Goods Orders in April.
Gold fell to more than a week's low on Thursday ending the session over than 2% lower, extending its decline for a third straight session, as investors grew apprehensive over U.S. rate cut timings and on strength in U.S. business activity.
Making gold less attractive, the dollar cut its losses for the day on U.S. business activity accelerating to the highest level in over two years in May, suggesting that economic growth picked up halfway through the second quarter.
Oil prices settled lower for the fourth-straight day Thursday, pressured by a rising dollar amid concerns over high for longer U.S. interest rates as well as crude demand concerns amid unexpected build in U.S. inventories.
On the supply front, markets were awaiting a meeting of the Organization of Petroleum Exporting Countries and allies (OPEC+) in early-June, where the cartel could potentially extend its current run of production cuts. OPEC+ oil producers are making voluntary output cuts totalling about 2.2 million barrels per day for the first half of 2024, led by Saudi Arabia rolling over an earlier voluntary cut.
U.S. stocks ended lower on Thursday, even as a strong revenue forecast for Nvidia fuelled a surge in its shares, but that was overshadowed by economic data showing inflation was still a concern that could delay any Federal Reserve rate cuts.
Nvidia shares jumped more than 9% to close above the $1,000 per share mark for the first time and helped boost the US Tech 100and US 500 to intraday records in the early stages of trading after the AI chip company forecast quarterly revenue above estimates and announced a stock split.
However, stocks lost ground after economic data showed U.S. price pressures increased in May even as business activity accelerated, and as lower weekly jobless claims indicated the labour market remains on firm footing.
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