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U.S. Trade Balance, Crude Oil Inventories, FOMC members speak

calendar 07/02/2024 - 09:04 UTC

The dollar fell against most major currencies on Tuesday, with the dollar index (USDX) declining from two-month highs despite the latest hawkish comments from Fed’s president and robust US economic data which lower expectations for an early rate cut. Some pressure on the US currency could be attributed to remarks by Cleveland Fed President Loretta Mester on Tuesday where she stated that if the U.S. economy performs as she expects, it could open the door to rate cuts.

According to the CME Fedwatch tool, the markets price in a 21.5% 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 54.2%.

The three main stock indices traded mixed on Tuesday remaining close to recently reached record highs. Prices were supported by solid earnings from tech giants such as Microsoft and Meta Platforms Inc reported on Monday. The positive momentum continues on Tuesday as Palantir Technologies Inc surged by more than 30% after reporting Q4 commercial revenue jumped underpinned by new business deals. In addition, Spotify also posted an increase of nearly 4% for the session as revenue climbed 17% and as the company attracted more monthly active users than expected.

Some major market players publishing their quarterly results later today are Uber, Roblox, Alibaba, ARM, Disney, PayPal and MATTEL. Other key earnings reports are due later this week by Wynn Resorts, Expedia, Pinterest and Pepsi co.

On the energy front, the two main benchmarks WTI and Brent rose by more than 1% on Tuesday, after the U.S. EIA on Tuesday cut its outlook for domestic oil output growth by 120,000 barrels per day to 170,000, sharply lower than last year's output increase of 1.02 million bpd.

For Wednesday, some price action is expected upon the release of US monthly trade balance and consumer credit reports, weekly crude inventories by the EIA and speeches by FOMC members Kugler and Barkin.


Following a negative start to the week, the EUR/USD pair ended the session on Tuesday with minor gains of 0.15%.

Data released from Eurostat showed on Tuesday that Eurozone Retail Sales fell 1.1% MoM in December worse than the market expectation of 1.0%. On an annual basis, Eurozone Retail Sales dropped 0.8% YoY in December above the consensus of 0.9% fall. From the European Central Bank (ECB), Board member De Cos expressed confidence in that inflation is heading back to the bank’s goal. ECB policymaker Vujcic reported that it is crucial for the ECB's credibility to be accurate regarding rate cuts.

In the meantime, the timing of potential interest rate cuts by the Federal Reserve (Fed) continued to be at the centre of the debate among investors, with speculation for a March rate cut rapidly losing traction in favour of a May or even June cut.



Gold firmed on Tuesday after a pullback in the U.S. dollar and Treasury yields, while market participants positioned for remarks from several Federal Reserve officials this week to gauge the likely pace of interest rate cuts this year. Gold prices ended the session 0.50% higher and were trading just above the level of $2035.00 per ounce.

At least eight Fed speakers are due to speak this week. After a robust jobs report last week, traders have pared back, opens new tab bets of a March U.S. rate cut.



Oil prices settled higher Tuesday, with both benchmarks ending the session with gains over than 1% as market participants cheered expectations for a slowdown in U.S. production that helped support sentiment on crude following signs of fresh progress toward a new Israel-Hamas ceasefire that could help ease geopolitical tensions.

U.S. production has been recovering following a weather-related dip in January, but will likely slow from record levels in 2024, the Energy Information Agency said Tuesday as it cut its forecast for domestic oil output by 120,000 barrels per day to 170,000 bpd.

U.S. crude stockpiles increased by less than expected last week, the API reported Tuesday, boosting sentiment on crude following expectations for a slowing domestic output.


US 500

U.S. stocks were higher after the close on Tuesday, as gains in the Basic Materials, Healthcare and Consumer Goods sectors led shares higher.

At the close, the US 30 and US 500 added 0.47% and 0.31% respectively while the US Tech 100 posted losses of 0.25%.

On the earnings front, Snap Inc plummeted by over 32.5% after the social media giant reported EPS of $0.08 versus expected losses of $0.17 per share, while revenue came in at $1.36 billion versus $1.38 billion expected. Ford Motor Company shares rose by more than 6% after the automaker reported EPS of $0.29 versus $0.12 expected, while revenues came in at $46 billion versus $43.04 billion expected.

Investors are now shifting their focus towards the upcoming quarterly results from media giant Walt Disney Company, as well as Uber Technologies Inc and PayPal Holdings Inc, scheduled for release later today.

US 500

The materials contained on this document should not in any way be construed, either explicitly or implicitly, directly or indirectly, as investment advice, recommendation or suggestion of an investment strategy with respect to a financial instrument, in any manner whatsoever. Any indication of past performance or simulated past performance included in this document is not a reliable indicator of future results. For the full disclaimer click here.

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