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25/09/2024 - 06:48 UTCThe US currency remains under pressure from the recent 50bps Federal Reserve rate cut, with the US dollar index down 0.6% on Tuesday to reach levels last seen in July 2023. The move has fueled speculation that the central bank may further loosen its monetary policy in response to slowing economic growth. Investors are now looking ahead to key economic data releases from the U.S. to gauge the likelihood of additional rate cuts. Key releases in the week ahead include U.S. GDP and the PCE price index data, the Fed’s preferred inflation gauge, which is due on Friday, and could offer more cues on interest rates while inflation is still trending well above the Fed's 2% annual target.
The market is currently expecting a 50-basis point rate cut by the Federal Reserve in November, with a 60.2% probability according to the CME's FedWatch tool. However, a smaller 25-basis point cut is still possible, although the odds are lower at 39.8%.
The major U.S. stock market indexes continued their upward trend on Tuesday, closing slightly higher and approaching all-time highs. Investors are eagerly awaiting a series of economic indicators and statements from the Federal Reserve this week, which could significantly impact market prices. Key events include the release of inflation data on Friday and speeches by Fed officials, including a highly anticipated address by Fed Chair Jerome Powell on Thursday.
Gold prices continued to soar, reaching a new all-time high of $2,670.9 per ounce on Wednesday morning. The decline in the U.S. dollar, driven by expectations of lower interest rates, has boosted demand for gold as a safe-haven asset.
In other news, the Chinese stock market has surged on Wednesday, in response to a series of new stimulus measures introduced by the Chinese government. The package of measures includes reductions in bank reserve requirements and mortgage rates. Additionally, Beijing is reportedly considering providing significant liquidity support to the stock market. These measures have increased optimism about the prospects for economic recovery in China, which has been struggling with deflation and weak business activity for nearly three years.
For Wednesday, some price action could be seen upon the release of new home sales data from the US, the weekly crude oil inventories report from the Energy Information Administration and a speech by FOMC member Kugler.
The EUR/USD pair rose on Tuesday ending the session 0.72% higher. Despite limited bullish drivers for the Euro, broad-market weakness in the US Dollar provided support.
On Tuesday, consumer confidence took a hit, with expectations for 12-month inflation rising to 5.2%. Consumers also expressed a dimmer outlook for their financial situation over the next six months, and their assessment of overall business conditions has turned negative.
European markets have no significant data releases scheduled for today and attention will turn to Federal Reserve (Fed) Board of Governors member Adriana Kugler, who is set to speak at the Harvard Kennedy School in Cambridge.
Gold prices soared to a new all-time high on Tuesday, driven by a sharp decline in US Consumer Confidence, as reported by the Conference Board. The dip in US Treasury yields and a weakening US Dollar further bolstered the precious metal's upward momentum.
The Conference Board's latest data revealed a significant drop in Consumer Confidence for September, marking its lowest point since August 2021. The decline is attributed to increasing concerns about the labor market and the broader economic outlook.
Oil prices climbed more than 1% on Tuesday, reaching a three-week high, driven by news of significant monetary stimulus from China, the world's largest crude importer, and growing concerns that escalating conflict in the Middle East could disrupt regional supply.
China's central bank unveiled its most extensive stimulus measures since the COVID-19 pandemic to revive the economy from its deflationary slump and push it towards the government's growth targets.
In the Middle East, a critical oil-producing region, tensions escalated as an Israeli airstrike on Beirut killed a senior Hezbollah commander. The increase in cross-border rocket attacks between Israel and Hezbollah has heightened fears of a broader conflict in the region.
The US 500 and US 30 both closed at record highs on Tuesday, overcoming weak U.S. consumer confidence data, as mining stocks surged following China’s announcement of a significant stimulus package.
The indexes briefly trimmed their gains after the Conference Board reported an unexpected decline in U.S. consumer confidence for September, driven by rising concerns about the labor market's strength.
Meanwhile, Federal Reserve Governor Michelle Bowman cautioned that key inflation indicators remain "uncomfortably above" the Fed's 2% target, suggesting a cautious approach as the Fed continues to lower interest rates. Weekly jobless claims and personal consumption expenditure data remain key focuses for investors this week.
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