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02/02/2024 - 09:10 UTCThe dollar posted a moderate decline against most major currencies on Thursday, with the dollar index (USDX) remaining within the tight range seen over the last two weeks. Despite comments from Fed Chairman Jerome Powell downplaying the likelihood of early monetary easing, investors keep expectations high that rate cuts in March or May are imminent. Data released on Thursday were mixed as US growth was reported faster than expected, while jobless claims also increased more than expected in the latest week.
According to the CME Fedwatch tool, the markets price in a 36.5% possibility that the 1st rate cut in 2024 will take place in the March FOMC meeting, while the same possibility for a rate hike taking place in May is at 61%.
On Thursday, all three main US stock market indices gained sharply, reversing prior losses and returning back to all-time highs seen earlier this week, with investors maintaining hopes of early rate cuts and ahead of a long awaited jobs report which is expected to show that employers added 180,000 jobs during the month.
Fourth quarter earnings are also in focus, with some key market players publishing their quarterly results later today, among which are Bristol-Myers Squibb, AbbVie, Chevron, Regeneron, Exxon Mobil and Spectrum.
On the energy front, the two main benchmarks WTI and Brent posted a second consecutive decline of more than 2% on Thursday, with the OPEC-JMMC Meetings disappointing buyers, after keeping their oil output policy unchanged. The group said it will decide in March on whether to extend the voluntary oil production cuts.
Some price action could be observed later in the day upon the release of the Non-Farm Payrolls report, the US unemployment rate, monthly factory orders and the University of Michigan consumer sentiment report.
EUR/USD dipped and recovered in a rough Thursday session, ending the day with gains of 0.65%.
The preliminary data in Europe showed that inflation declined less than markets were hoping, with the European CPI easing to 3.3% for the year ended in January, missing the median market forecast of 3.2% and trimming only slightly back from the previous period’s 3.4%.
On the other hand, US January ISM Manufacturing Purchasing Managers’ Index (PMI) bounded into a new three-plus year high of 49.1 versus the forecast backtick to 47.0 from December’s 47.1. US Initial Jobless Claims ticked upwards to 224K for the week ended January 26 versus the forecast 212K.
Meanwhile, investors are expected to continue exercising caution in anticipation of the release of the significant US Nonfarm Payrolls report on February 2. This report is expected to provide additional insights into the timing of any potential future decisions on interest rates.
Gold firmed nearer a one-month high on Thursday after data showed U.S. weekly jobless claims rose last week, while market focus shifted to the U.S. non-farm payrolls data for more cues on the Federal Reserve's policy path. Gold prices ended the session 0.72% higher just above the level of $2055.00 per ounce.
The Labor Department said initial jobless claims increased to a seasonally adjusted 224,000 for the week ended Jan. 27. A separate report showed that U.S. worker productivity grew faster than expected in the fourth quarter.
Investors' focus now shifts to Friday's U.S. nonfarm payrolls for further clarity on the interest rate path.
Oil prices fell over 2% on Thursday after unsubstantiated reports of a ceasefire between Israel and Hamas and after a power outage forced a large U.S. refinery to shut.
Tensions in the Middle East - that have kept supply disruptions concerns elevated - remained in focus as traders weighed up conflicting reports about a potential ceasefire in Gaza.
Moreover, The Organization of Petroleum Exporting Countries and allies, known as OPEC+, held a meeting earlier Thursday, the first major meeting of 2024, but there was limited price impact after the group left production policy changes off its agenda.
U.S. stocks rebounded on Thursday as investors looked to a spate of high-profile earnings and the Friday's employment report a day after the Federal Reserve quashed lingering bets that interest rate cuts could begin as early as March. A broad rally sent all three major U.S. stock indexes sharply higher, with the US 500 and US 30 adding 1.59% and 0.87% respectively, while US Tech 100 advanced 1.79%.
Shares of Meta Platforms rose in extended trading after reporting better than expected revenue and declaring its first-ever dividend. Several companies, including Chevron Corp, Exxon Mobil Corp, Bristol-Myers Squibb Company, Cigna Corp, and AbbVie Inc, are all set to report earnings before the trading bell on Friday. Moreover, market participants will be examining the release of January's nonfarm payrolls report which is due today.
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