The U.S. dollar posted another moderate increase against most major currencies on Wednesday, with the dollar index (USDX) sitting close to a near two-month high, ending the session up by 0.42%. Market focus is squarely on PCE price index data, the Federal Reserve’s preferred inflation gauge, as well as the first Presidential debate, which is set to take place later on Thursday.
In other news, the dollar breached the 160.0 mark against the yen in overnight trading, something which traders had pegged as the threshold for more government intervention. These price levels had invited government intervention in May, where the government sold large amounts of dollars to buy up yen and support the currency. Uncertainty surrounding U.S. interest rates and worries about China's weak economic data dampened sentiment in Asian markets.
According to widely cited CME Fedwatch tool, a September rate cut is the most likely scenario with chances at nearly 60% while for November, the possibility stands at around 50%.
Wall Street closed with cautious optimism Wednesday, buoyed by the tech sector's rise ahead of crucial inflation data. Amazon's move higher, further fueled the positive sentiment as the company’s stock closed at record highs after gaining 4% on the day, taking its market cap to $2 trillion.
Despite early gains, NVIDIA's stock price ended flat on Wednesday. This follows a strong rally of over 7% the previous day. However, investor sentiment remains positive towards NVIDIA, driven by the ongoing growth in Artificial Intelligence, which has propelled the company's share price to double digits so far this year.
With the Fed projecting only one interest rate cut in December, all eyes will be on whether the PCE inflation data continue to show a moderation in price pressures, after a recent improvement shown in the CPI data and outright deflation in the PPI. Another highlight for this week, is the first presidential debate of the 2024 election held later today between Donald Trump and Joe Biden.
EUR/USD
EUR/USD backslid into the 1.0680 region on Wednesday ending the session 0.27% lower after the German GfK Consumer Confidence Survey for July ticked lower unexpectedly.
Fears over Eurozone elections intensified after French President Emmanuel Macron called for a snap election when his party suffered defeat in preliminary results from Marine Le Pen’s far-right National Rally (RN).
German consumer confidence backslid to -21.8 for July, missing the forecast recovery to -18.9.
US New Home Sales Change in May clocked in a -11.3% decline MoM on Wednesday, compared to the previous month’s 2.0%.
Later today, US Durable Goods Orders, revisions to first-quarter Gross Domestic Product (GDP), and weekly Initial Jobless Claims will be released.