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25/05/2023 - 07:51 UTCThe U.S. dollar edged higher once again on Wednesday, for the fourth time this week, and continues to gain early on Thursday, with the USDX marking a 0.37% daily gain and making its way to break the 104.0 mark. The Turkish lira continues to flirt with new record levels trading close to 19.90 on Wednesday’s close, as the election race continues and as the Central Bank of the Republic of Turkey (CBRT) is due to publish its interest rate decision on Thursday.
Precious metals saw little support, despite the new wave of uncertainty that hit global markets, with investors turning to the dollar as a safe haven. Part of the move in the dollar could be attributed to renewed expectations that U.S. interest rates could remain higher for longer, as signalled by the Federal Reserve. The minutes of the Fed’s May meeting showed on Wednesday that policymakers were hesitant to hike rates further amid growing pressure on the banking sector and increased economic headwinds.
The US 30 and the US 500 ended lower by 1.13% and 0.47% respectively on Wednesday, while the US tech 100 moved in the opposite direction, marking a 0.72% gain, ahead of a June 1 deadline for a U.S. debt default, which could push the U.S. into recession and have dire consequences for the global economy. Ratings agency Fitch warned of a U.S. ratings downgrade in the event of a default.
In Asia, concerns over more deterioration in Chinese demand seem to weigh on the China A50 that fell sharply by more than 3% in the past two days as the country is now dealing with new COVID-19 infections that could possibly disrupt activity.
On Thursday, U.K. CBI realized sales will be published while later in the day investors could shift their focus towards preliminary GDP data for the first quarter in the U.S. as well as U.S. jobless claims and pending home sales, for further clues on the health of the economy.
The EUR/USD dropped for the second day in a row, ending the session 0.13% lower as a stronger Dollar continues to drive the pair to the downside.
Economic data released on Wednesday showed the German IFO Business Climate Index edged lower to 91.7 in May from 93.4 in April. This reading came in weaker than the market expectation of 93.
The FOMC minutes showed officials were divided on the future path regarding interest rates, with some members pointing out the need for more rate hikes and others arguing that this policy may not be necessary. The FOMC showed uncertainty about how much more policy tightening may be appropriate. The Dollar after the minutes held most of its daily gains.
Gold slipped on Wednesday as the dollar firmed, cutting some safe haven flows that could have ended up in bullion, as the risk of a U.S. debt default is looming and as investors most likely took into account the minutes of the Federal Reserve’s May meeting. The minutes showed on Wednesday that policymakers were hesitant to hike rates further amid growing pressure on the banking sector and increased economic headwinds.
Gold prices posted a decline of 0.77% ending the session at $1960.03. But despite the market uncertainty, gold saw little safe haven demand as traders turned to the dollar. The Dollar hit a two-month high on expectations that U.S. interest rates will remain higher for longer, as signaled by the Federal Reserve.
Oil prices posted an increase for a third consecutive day with WTI Oil contract closing the day 0.51% higher at 74.235.
Oil hit three-week highs on Wednesday, after U.S. government data showed the biggest weekly crude oil decline in six months. The U.S. crude inventory balance fell by 12.456 million barrels during the week ended May 19, indicating demand in the run-up to summer travelling season.
During Wednesday’s session, oil prices pulled back from their highs after U.S. House Speaker Kevin McCarthy said on Wednesday, he and congressional Republicans were still “far apart” with President Joe Biden and the Democrats in talks to raise the federal debt ceiling.
The U.S main indices showed mixed results on Wednesday, with US 30 and US 500 ending the session 1.13% and 0.47% lower respectively while US tech 100 ended the day 0.72% higher.
The lack of progress on raising the U.S. government's $31.4 trillion debt limit ahead of a June 1 deadline, with several rounds of unproved talks, has made investors edgier as the risk of a disastrous default looms larger.
On the other hand, Nvidia (US Tech 100) popped 24,6% reporting Q1 EPS of $1.09 versus $0.92 expected on revenues of $7.19 billion versus $6.52B.
Ahead in Thursday's session, traders will be looking towards preliminary GDP figures, weekly jobless claims, pending home sales as well a speech from the Fed's Collins.
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