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26/09/2024 - 07:12 UTCThe US currency gained sharply against most of its major peers on Wednesday, with the US dollar index recovering from lows last seen in July 2023. Investors will most likely look to upcoming speeches from Fed members, for clues on the pace of interest rate cuts. While there was no obvious catalyst to justify the recent gains in the dollar, the market did seem less certain about aggressive rate reductions, as Fed officials offered varying perspectives. Other key releases that could determine the direction of the dollar this week, include the U.S. GDP due later today and the PCE price index data, the Fed’s preferred inflation gauge, which is due on Friday.
The market is currently expecting a 50-basis point rate cut by the Federal Reserve in November, with a 62.6% probability according to the CME's FedWatch tool. However, a smaller 25-basis point cut is still possible, although the odds are lower at 37.4%.
Major U.S. indexes painted a mixed picture on Wednesday, with the US 500 falling by a mere 0.06% but still hovering near its all-time highs, the US 30 down by 0.60% and the US tech 100 jumping to new record levels, up by 0.48% by the end of the session. Market participants will most likely be watching economic indicators and Fed statements scheduled for this week, anticipating potential market-moving developments.
In corporate news, Nvidia shares climbed 2% on Wednesday, extending Tuesday's gains. This rally follows news that CEO Jensen Huang had finished selling shares under a pre-arranged trading plan, totaling over $700 million. Huang's stock sales had raised concerns about the company's future, particularly following its disappointing quarterly results and delays in advanced AI chip development.
In other news, Asian markets continue to move higher early on Thursday, with the Nikkei index up by more than 2% since yesterday’s opening price. The move was fueled by China's stimulus optimism and a strong tech rally led by Micron's earnings. Investors cheered the chipmaker's AI-driven growth which boosted the notion that chipmakers are likely to continue benefiting from strong AI-fueled demand.
For Wednesday, some price action could be seen upon the release of U.S. final GDP data, durable goods orders, pending home sales and key speeches from Fed’s chairman Jerome Powell, Treasury’s Janet Yellen and the ECB President Christine Lagade.
The EUR/USD pair retreated on Wednesday, dropping back below the 1.1200 level and dipping into familiar near-term resistance just above 1.1100.
In the U.S., consumer confidence declined this week as the average American remains cautious despite the stock market’s optimism over potential Federal Reserve rate cuts.
The U.S. housing market also showed signs of slowing, with new home sales dropping 4.7% in August to 716,000, down from a revised 751,000 in July. Additionally, a fresh estimate of second-quarter Gross Domestic Product (GDP) growth, expected to remain steady at 3.0% on an annualized basis, is due.
Thursday will also feature several speeches from Federal Reserve officials, including Fed Chair Jerome Powell and European Central Bank (ECB) President Christine Lagarde and ECB Executive Board Member Isabel Schnabel.
Gold prices remained stable above $2,650 for the second consecutive session on Wednesday, as traders increased bets on another substantial interest rate cut by the Federal Reserve (Fed) at its November meeting.
Gold prices have surged by over 29% in 2024, driven by strong physical demand and central banks initiating easing cycles. Geopolitical tensions are also contributing to the bullish outlook, with traders eyeing a potential rise to $2,700.
Oil prices declined on Wednesday as the previous day’s optimism driven by China’s stimulus measures cooled. However, a larger-than-expected drawdown in U.S. crude inventories helped cushion the losses.
The Energy Information Administration reported that U.S. oil stockpiles fell by 4.5 million barrels in the week ending September 20, significantly more than the expected 1.1 million barrel draw. U.S. inventories were seen remaining tight as supply disruptions due to storms in the Gulf of Mexico offset slower fuel demand after the end of the travel-heavy summer season.
U.S. stock index futures rose in Wednesday evening trading, led by gains in technology stocks following a strong earnings report from memory chip maker Micron. However, overall market gains were limited after a negative session on Wall Street, as attention turned to an upcoming speech from Federal Reserve Chair Jerome Powell.
Micron Technology Inc surged over 14% in after-hours trading after posting stronger-than-expected quarterly earnings, driven by robust demand for its memory chips, particularly in the artificial intelligence (AI) sector. The company also provided a bullish forecast for the current quarter, further fueled by the demand for high-bandwidth memory chips, essential in AI applications.
Investors are now closely watching the Federal Reserve for further clues on its monetary policy trajectory, with Chair Jerome Powell scheduled to speak on Thursday.
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