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15/03/2024 - 09:11 UTCThe US Dollar had a solid performance on Thursday, with the dollar index (USDX) ending the session with gains of 0.55% trading close to 103.5 level early on Friday. The move was supported by rising expectations for a hawkish Fed in next week’s meeting, following stronger than expected Producer Price data reported for February. The Fed could now potentially hold back on monetary easing, given it has previously mentioned that any rate cuts in 2024 will be largely dictated by the path of inflation.
Still, markets maintained their bets at 60.3% that the Fed will have enough cause to begin cutting rates by June, with a 25-basis point reduction still on the cards, according to the CME Fedwatch tool.
In other news, gold prices are holding strong, trading steadily right below recent highs of $2,189.27 per ounce, with investors waiting for the upcoming Fed meeting to set the direction for the precious metal.
Wall street sentiment remains strong as all three main indices are higher for the week, even though a minor decline was posted on Thursday due to additional signs that inflation remains high. In corporate news, United States Steel Corporation fell more than 6% after President Joe Biden voiced concerns over U.S. Steel’s proposed acquisition by Japanese company Nippon Steel Corp. Biden said it was "vital" for U.S. Steel to remain an American steel company. Nippon Steel could pay U.S. Steel a $565 million breakup fee if the merger fails to be completed. Later today, FiVe BELoW will publish its quarterly earnings report.
On the cryptos front, the two main cryptocurrencies by market capitalization Bitcoin and Ethereum, are trading in the red on the weekly chart. This follows record highs hit earlier this week, fueled by a rush of capital being poured into U.S. spot exchange-traded crypto products and the prospect that global interest rates may fall.
In today’s session, some price action could be observed upon the release of UK consumer inflation expectations, US manufacturing, industrial production, import prices and UoM consumer sentiment data while Canada will report on housing starts.
EUR/USD posted a sharp decline on Thursday losing 0.64% and dipped below the key 1.0900 after the release of US macroeconomic data indicates continued inflationary pressures in the economy.
The U.S. PPI rose more than expected in February whilst Retail Sales data increased but failed to hit estimates. US Initial Jobless Claims undershot expectations and came out a little lower than previously.
In Europe, meanwhile, a string of rate-setters from the European Central Bank (ECB) are scheduled to speak with their comments likely to shed light on when the central bank will decide to start cutting its interest rates.
Gold slid on Thursday after a larger-than-expected rise in February's U.S. producer price index (PPI) cooled expectations of early rate cuts by the Federal Reserve, boosting Treasury yields and the dollar.
U.S. producer prices increased more than expected in February amid a surge in the cost of goods like gasoline and food, which could fan fears that inflation is picking up again.
Higher inflation adds pressure on the Fed to keep interest rates elevated, weighing on non-yielding assets such as gold.
However, traders continue to bet on interest rate cuts in June, pricing in about a 60% chance, compared with 72% before the CPI data earlier this week, according to the CME Group's FedWatch Tool.
Oil prices rose on Thursday to end the session at four-month highs as the International Energy Agency predicted a tighter market in 2024 and raised its view on oil demand growth this year.
The IEA raised its forecast for world oil demand in 2024, saying it will rise by 1.3 million barrels per day, up 110,000 barrels per day from last month.
Meanwhile, Ukrainian drone strikes on Russian refining facilities continued for a second day on Wednesday, targeting four large oil refineries. Increased clashes with Ukraine also point to elevated geopolitical risks to oil markets, which are already grappling with the Israel-Hamas war.
U.S. main indices fell on Thursday, as hotter-than-expected inflation readings put markets on edge before a Federal Reserve meeting next week. US 500 added losses of 0.48% while US 30 and US Tech 100 retreated 0.61% and 0.73% respectively.
The reading came just days after a strong consumer price index print, with the two data points ramping up concerns that the Fed will need to keep rates higher for longer to bring down inflation.
Losses on Wall Street were held back by gains in energy stocks, which tracked a spike in oil prices to near five-month highs. On the other hand, Technology stocks, particularly chipmakers exposed to artificial intelligence, saw steep losses on Thursday as fears of higher-for-longer interest rates spurred heavy profit-taking.
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