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02/04/2024 - 08:04 UTCThe US dollar was up against most major currencies on Monday, hitting a six-week high against the euro, with the dollar index (USDX) ending the session 0.48% higher. The move came following news that the U.S. manufacturing sector grew in March for the first time since September 2022. In the meantime, market focus shifts towards upcoming inflation indicators from Germany and key employment numbers due from the US, with the Non-Farm Payrolls release on Friday being the highlight of the week.
A speech by Fed’s chairman Jerome Powell on Wednesday could also attract some attention later this week as investors look for hints on the likelihood of a June rate cut. Bets for a rate cut in June were pushed back to 56%, from levels above 60% seen last week, according to the CME Fedwatch tool.
In Wall Street, sentiment appears weakened, despite Friday’s inflation data being lower than expected, as signs of resilience in the US manufacturing sector raise concerns that could push back the long awaited Fed rate cuts. All three main US stock indices ended the session in the red right after they notched their best first-quarter performance since 2009. Fed Chair Jerome Powell said on Friday the latest U.S. inflation data was "along the lines of what we would like to see," affirming his remarks after the Fed's policy meeting last month.
In other news, the yen is stepping up to the spotlight, as an emergency meeting was held by Japan's three monetary authorities, the Ministry of Finance (MOF), the BOJ and the Financial Services Agency with comments from officials so far keeping the yen above 34-year lows. Finance Minister Shunichi Suzuki said on Monday he would not rule out options against excessive currency movement and would respond appropriately.
Some price action could be observed later in the session, upon the release of manufacturing data from the eurozone and the UK as well as US employment data, factory orders and comments from Fed members Williams Mester and Daly where markets could be watching closely for possible hints on the Fed’s monetary policy plans. Other releases that could attract some attention later this week are the US average hourly earnings, non-farm employment change and the unemployment rate.
The Euro extends its losses against the US Dollar on Monday ending the session 0.52%, with most European markets being closed in observance of Easter Monday.
The Institute for Supply Management revealed that business activity in March expanded for the first time since September 2022 in U.S. an indication that the economy remains solid. The Manufacturing PMI came at 50.3, exceeding estimates of 48.4 and smashing February’s 47.8 reading. The same report revealed that the Prices Paid Index expanded to 55.8, its highest level since August 2022, when it hit 52.5. This could deter the Federal Reserve from easing policy, as the economy fares better than expected.
Across the pond, the Eurozone economic docket will feature the release of the HCOB manufacturing PMI for Spain, Italy, France, Germany, and the Eurozone.
Gold prices posted gains on Monday as the dollar and bond yields rose, after the bullion surged to a fresh record high on growing expectation that the U.S. Federal Reserve could deliver the first interest rate cut in June. Data on Friday showed U.S. prices moderated in February, keeping a June interest rate cut from the Fed on the table.
Gold tends to gain when interest rates are low, which reduces the opportunity cost of holding non-yielding bullion. Growing rate cut expectations, safe-haven demand and central bank purchases amid geopolitical tensions have boosted gold this year.
Crude prices edged up about 1% on Monday on expectations that economic growth in the U.S. and China will boost demand, while supplies tighten on OPEC+ output cuts and attacks on Russian refineries.
OPEC and its allies, OPEC+, ministers are set for an online meeting Wednesday to review supply and demand in the market as well as how closely members' have stuck to the agreed output cuts.
In the U.S., manufacturing grew in March for the first time in 1-1/2 years and at the same time in China, manufacturing activity in March expanded for the first time in six months, according to an official factory survey.
U.S. main indices edged lower on Monday, dragged down by market participants worries over the timing of interest rate cuts by the Federal Reserve after stronger-than-expected manufacturing data pushed Treasury yields higher. At the close US 500 lost 0.80% while US 30 and US Tech 100 posted losses of 1.43% and 0.74% respectively.
The Institute for Supply Management (ISM) said its manufacturing PMI increased to 50.3 last month, the highest and first reading above 50 since September 2022, from 47.8 in February. It suggested the manufacturing sector, which has been battered by higher interest rates, was recovering.
Microsoft rose nearly 1% as the tech giant plans to begin offering its chat and video app, Teams, as a standalone product.
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