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29/08/2024 - 07:54 UTCThe dollar index (USDX) gained by 0.51% ending Wednesday’s session at 100.99, having earlier this week touched its lowest point since last year at 100.418. According to reports, the dollar's uptick was partially driven by month-end portfolio adjustments and bottom buying. Traders now appear cautious, anticipating economic indicators that would influence the Federal Reserve's decision on the extent and speed of interest rate reductions.
The CME's FedWatch tool suggests a 65.5% chance of a 0.25% rate cut in September, while a 0.5% cut is seen as less likely at 34.5%. November odds for another cut stand at around 44%.
In corporate news, Nvidia's stock price experienced significant pressure in after-hours trading, although the company reported better-than-expected earnings for the May-July quarter. Despite the positive earnings result, the firm's revenue guidance for the current quarter fell short of some analyst estimates, and its gross margin outlook was also less optimistic. Additionally, the company announced a slowdown in growth compared to previous quarters. Despite these headwinds, analysts maintained a predominantly bullish stance on the stock, with some brokerages even raising their price targets.
Early on Thursday, Asian markets experienced a pullback primarily driven by declines in the technology sector following Nvidia's less-than-stellar outlook. However, expectations of lower interest rates helped mitigate the overall downturn. The negative sentiment in Asian stocks was also influenced by a weaker performance in U.S. stock futures.
In the energy sector, both WTI and Brent crude oil retreated by around 1.7% on Wednesday, following a less-than-anticipated decline in U.S. crude oil stockpiles while persistent concerns about China's oil demand also weighed on prices. However, the decline was tempered by ongoing supply risks in the Middle East and Libya.
Market participants are focused on a packed economic calendar for the rest of the week, which includes several critical data releases that could significantly influence price movements. These key indicators include the preliminary U.S. GDP figures, weekly jobless claims, pending home sales, Eurozone CPI, U.S. consumer sentiment, U.S. inflation expectations, Core PCE price index data, and a speech by FOMC’s Bostic.
The EUR/USD ended the session on Wednesday 0.47% lower as market participants continue to anticipate a rate cut from the Federal Reserve (Fed) in September, which has bolstered risk appetite across the board.
Attention turns to Thursday's update on US Gross Domestic Product (GDP) figures, which is expected to garner significant interest.
The most critical data point of the week remains the US Personal Consumption Expenditure Price Index (PCE) inflation, also due on Friday.
Investors are closely monitoring this report for signs that inflation is easing or at least not rising quickly enough to deter the Federal Reserve from proceeding with a highly anticipated rate cut at its September 18 meeting.
Gold prices fell on Wednesday, pressured by a strengthening U.S. dollar as investors focused on upcoming inflation data from the United States for insights into the potential size of the Federal Reserve’s rate cut in September.
In other market developments, China’s net gold imports via Hong Kong rose 17% in July, marking the first increase since March, according to data released on Tuesday. As a major consumer of gold, China’s rising demand could lend support to global gold prices.
Oil prices dropped on Wednesday amid fresh indications of declining summer crude demand, following a smaller-than-expected draw in U.S. crude supplies.
The Energy Information Administration (EIA) reported a decrease of 846,000 barrels in U.S. crude stocks for the week ending August 3, significantly lower than the prior week's draw of 4.7 million barrels and below market expectations of a 2.7 million barrel decline.
Oil prices were also pressured by a rebound in the U.S. Dollar Index, as investors have largely priced in the likelihood of U.S. interest rate cuts starting next month.
U.S. stock index futures fell on Wednesday, driven by losses in technology stocks after Nvidia provided a disappointing revenue forecast, overshadowing its strong earnings report.
Nvidia reported stronger-than-expected profits for the May-July quarter and announced a substantial $50 billion share buyback. However, its revenue forecast of $32.5 billion, plus or minus 2%, fell short of some analysts' higher expectations, which ranged up to $31.9 billion according to Bloomberg and $31.77 billion per Reuters estimates.
Growing expectations of an interest rate cut in September had recently supported Wall Street indexes, with gains increasingly focused on economically sensitive sectors.
Investors are now turning their attention to the Personal Consumption Expenditure (PCE) price index data, the Federal Reserve’s preferred inflation measure, due on Friday, which is expected to provide further insights into the inflation outlook.
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