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08/03/2024 - 08:23 UTCThe dollar traded lower for yet another session on Thursday, with the dollar index (USDX) accumulating losses of approximately 1.00% in the last two sessions, following two testimonies this week by Fed chairman Powell where he confirmed the Fed’s intentions to begin cutting rates in 2024 with no clear clues as to the timing and scale of the planned cuts. Powell stated that the U.S. central bank is "not far" from getting enough confidence that inflation is heading to its 2% goal.
According to the CME Fedwatch tool, bets for a first rate cut to take place in the June 2024 FOMC meeting remain elevated at 56.0%.
In other news, the European Central Bank is cautiously preparing the ground for monetary easing later this year. While no specific reference was made to rate cuts, ECB president Lagarde mentioned dialling back of their restrictive stance. Following the ECB statements, the euro recovered sharply, to post its biggest daily gain against the dollar in about a month.
Positive momentum is still evident in Wall Street with the US 500 logging a new record high, led by a rally in technology and A.I. based stocks. Major support was provided by NVIDIA Corporation which gained by more than 4% in the last session, to hit new record highs, as the chipmaker continues benefit from optimism demand for chips will rise significantly. In other news, Oracle (ORCL) is announcing its Q4 earnings report later today.
Fundamentals on Thursday showed the number of Americans filing new claims for unemployment benefits was unchanged last week, with the focus now squarely on the Labor Department's February non-farm payrolls report for more hints as to the health of the labor market, which is also a key consideration for the Fed in adjusting rates.
Some price action could also be observed upon the release of the revised quarterly GDP data from the eurozone, the US and Canadian unemployment rates and the US average hourly earnings numbers.
The EUR/USD pair rallied into 1.0950 area on Thursday, bolstered by prospects of movement from the European Central Bank (ECB) and an easing US Dollar (USD) on the back of a steady showing from Federal Reserve (Fed) Chairman Jerome Powell. The pair ended the session with gains of 0.47% and is headed to post gains for a third consecutive week.
The European Central Bank (ECB) decided to leave its monetary policy unchanged on Thursday as the central bank is still on course to bring inflation back to its target range.
Across the pond, the Fed Chair Jerome Powell said on Thursday that interest rate cuts may not be too far off if inflation signals cooperate. However, Powell emphasized that the timing and scale of rate cuts will depend on the data.
Investors will closely watch the US February labor market report on Friday, including US Nonfarm-Payrolls, Unemployment Rate, and Average Hourly Earnings.
Gold raced to an all-time high on Thursday, extending its record run this week as increasing bets for U.S. monetary easing added to sustained tailwinds for bullion from central bank buying and safe-haven demand.
Powell said the Fed is "not far" from getting enough confidence that inflation is heading to the Fed's 2% goal to be able to start interest-rate cuts.
A low-interest rate environment translates into reduced opportunity cost of holding non-yielding gold and weighs on the dollar, making bullion cheaper for overseas buyers.
Further market direction could come from Friday's U.S. non-farm payrolls report.
Oil prices were little changed on Thursday ending the session slightly higher as markets weighed new economic data from China against increasing supply from the U.S.
China's import and export growth beat estimates, suggesting global trade is turning a corner in a positive signal for policymakers as they try to shore up economic recovery. Furthermore, growing optimism of rate cuts by central banks that would boost global economic growth.
Wall Street charged ahead on Thursday, with the US 500 rising 1.01% to a record closing high while the US Tech 100 finished up 1.38%, with the biggest boosts from technology and growth stocks on increasing investor optimism about prospects for Federal Reserve rate cuts this year. US 30 ended the session 0.34% higher.
Comments by Powell reinforced investor hopes for a first rate cut in June and boosted equity indexes that had faltered in the days leading up to his Congressional testimonies.
Also, the number of Americans filing new claims for unemployment benefits was unchanged as the labor market continued to ease, Labor Department data showed.
NVIDIA Corporation rose more than 4% to close at a fresh record high, driving the broader tech sector higher as the chipmaker continues benefit from optimism that the AI revolution will spur demand for chips.
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