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01/09/2023 - 07:35 UTCThe U.S. dollar made a moderate recovery on Thursday, following significant inflation data that came out in line with expectations as well as unemployment claims that showed some resilience in the US employment sector. The dollar index (USDX) ended the day 0.47% higher. Against the Turkish lira, the dollar seems to be gaining ground in the past week, recovering from the sharp decline of almost 5% seen about a week ago, and once again closing in on the all-time high of 27.48 reached in the beginning of the month.
Energy prices continue to move higher on Thursday, for a third consecutive session, with WTI ending the day 2.43% higher while Brent gained 1.79% on the iFOREX platform. Part of the move could be attributed to unexpectedly positive Chinese factory activity data and additional stimulus implemented. China announced measures to support its housing market, while at the same time it reduced foreign exchange reserve requirements for local banks to release more dollars and support the yuan.
The main US stock indices showed signs of a possible correction on Thursday, following a series of consecutive gains, with the US 500 down by 0.14%, the US 30 declining by 0.53% while the US tech 100 gained only 0.22%. Even though economic releases from the US were somewhat in line or better than anticipated, they underscored expectations that the Federal Reserve will pause its rate-hiking cycle in September. Part of the push also came from Tesla and Salesforce as they gained 0.46% and 2.85% respectively. Tesla was the most traded stock in the Nasdaq with $27.7 billion worth of shares exchanged during the session while Salesforce announced upbeat revenue forecasts indicating that it benefits from price hikes and a resilient demand.
In the spotlight for Friday are key U.S. nonfarm payrolls data for August, due later in the day. Possible signs of resilience in the employment market gives the Federal Reserve more room to increase interest rates, something that adds pressure in equities and other markets. Other news expected on Friday, include Canadian GDP, U.S. and eurozone manufacturing PMI’s, U.S. non-farm payrolls and unemployment rate, average hourly earnings and construction spending.
The EUR/USD pair posted losses on Thursday as the Euro underperformed, and the US Dollar posted mixed results. The pair posted a sharp decline of 0.80% which is the biggest in five weeks period.
Eurozone inflation data did not offer any surprises. German retail sales showed an unexpected decline in July. European Central Bank (ECB) policymaker Robert Holzmann stated that interest rates are not yet at their highest level and that another one or two rate hikes are possible.
US consumer inflation figures did not have a significant impact as they met the expectations. Now, the focus turns later today to NFP report and to the ISM Manufacturing PMI.
Gold prices posted minor losses on Thursday after three consecutive days of gains, after as as-expected U.S. inflation figures.
U.S. inflation as measured by the personal consumption expenditures (PCE) price index rose 0.2% last month, matching June’s gain. In the 12 months through July, the PCE price index increased 3.3%, after advancing 3.0% in June. U.S. Treasury yields and the dollar index ticked up, after briefly trimming their gains following the economic data, making non-yielding bullion less attractive.
Oil prices gained around $2 a barrel on Thursday, rising for a third month in a row amid expectations that cuts by the OPEC+ group of oil producing nations, led by Saudi Arabia would continue through the end of 2023.
Russian Deputy Minister and de-facto oil minister Alexander Novak said Russia and OPEC+ will announce further “actions” next week. Analysts expect Saudi Arabia to extend a voluntary oil production cut of 1 million barrels per day into October, adding to cuts put in place by the Organization Petroleum Exporting Countries and its allies, or called OPEC+.
U.S. stock futures were trading in a tight range on Thursday night, following a mixed performance among major benchmark averages as market participants looked ahead to key nonfarm payrolls data set for release later in Friday's trade. Gains in the Technology, Telecoms and Consumer Services sectors led shares higher while losses in the Healthcare, Utilities and Financials sectors led shares lower. U.S main indexes ended the session posting mixed results, with the US 500 and US 30 ending with losses of 0.14% and 0.53% respectively, while US Tech 100 ended the day 0.22% higher.
The Core personal consumption expenditures price index, the Fed’s preferred gauge of inflation, rose 0.2% in July, in-line with the prior month’s pace and economists’ expectations. Ahead in Friday's trade, market participants will closely monitor average hourly earnings, nonfarm payrolls, and unemployment rate figures, as well the ISM Manufacturing PMIs.
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