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The dollar gained against most major currencies in the past two sessions, with the dollar index (USDX) reaching 103.46, a level last seen early in December. The move came following robust U.S. retail sales data that raised expectations that the Federal Reserve will not rush to lower interest rates.
According to the CME FedWatch Tool, the possibility for a rate cut in the March FOMC meeting fell from levels of 69% currently at 59.5% while the possibility for an additional rate cut taking place in May is at 49.9% from 65.7% seen earlier this week.
Gold prices fell sharply on Wednesday following U.S. retail data indicating a resilient economy thus increasing doubts over early interest rate cuts by the Federal Reserve. The yellow metal wiped out a major part of the gains seen in December, trading 2.59% lower so far this month, hovering near the $2,000 per ounce support level.
The main US stock market indices all ended Wednesday’s session in negative territory, despite gains in the main tech names, including Apple (AAPL), Meta (META) , and Nvidia (NVDA). According to reports, only about 25% of the Nasdaq 100 stocks closed with gains while most stocks of small market capitalization lagged behind once again as expectations for a possible rate cut were pushed back.
Energy prices edged higher on Wednesday, despite recent gains in the dollar, as supply disruption concerns persist following a fresh wave of strikes against the Yemen-based Houthi group this week by U.S. and UK forces. Further pressure came from severe cold weather conditions that appeared to have spurred some disruptions in U.S. production.
For Thursday, some price action could be seen later in the session, upon the speech of FOMC Member Bostic Speaks, US jobless claims, US building permits, US housing starts, the Philly Fed Manufacturing Index, a speech by ECB President Lagarde and the EIA crude oil inventories report. On the earnings front, Schlumberger will be publishing their quarterly results later this week.
EUR/USD traded mostly on the defensive on Wednesday, briefly dipping to new multi-week lows and then bouncing off to end the session with minor gains adding 0.07%.
The continuation of the uptrend in the greenback was propped up by firmer readings from US Retail Sales during December, which in turn maintained the downside pressure on bets on an interest rate cut by the Fed in March.
Back to the ECB, officials, including Knot, have reported that markets are anticipating cuts and stress the importance of aligning factors for a 2% inflation target in 2025 while President Lagarde suggested a potential rate cut in the summer.
Gold prices fell to a more than one-month low on Wednesday as strong economic data strengthened dollar and Treasury yields and lowered market expectations of a U.S. rate cut in March. U.S. retail sales increased more than expected in December, keeping the economy on solid ground heading into the new year.
Fed Governor Christopher Waller's on Tuesday said that the central bank should not rush to cut rates until lower inflation can be sustained.
Oil prices rose slightly in on Wednesday as severe cold weather appeared to have spurred some disruptions in U.S. production, while military action in the Middle East raged on. But gains in crude were limited by industry data showing an unexpected build in U.S. inventories. While the cold weather caused some production stoppages, it also appeared to have discouraged travel, which is a key driver of U.S. fuel demand.
Strength in the dollar weighed on oil prices, as traders priced in a smaller chance of early interest rate cuts by the Federal Reserve, following stronger-than-expected retail sales data.
Wall Street stocks finished lower on Wednesday after upbeat December U.S. retail sales data eroded expectations the Federal Reserve will kick off its rate-cut campaign as early as March. Data showed discounts from retailers and increased motor-vehicle purchases supported a higher-than-expected rise in U.S. retail sales, keeping the economy on a solid footing in 2024.
During Wednesday's session the US 30 fell 0.24%, the US 500 ended the session 0.62% lower while US Tech 100 lost 0.73%.
Among earnings, companies including Taiwan Semiconductor Manufacturing, Truist Financial Corp, PPG Industries Inc and JB Hunt Transport Services Inc are set to report quarterly results. On Thursday market participants will see the release of weekly jobless claims, housing starts, and building permits data. Raphael Bostic, the President of the Atlanta Federal Reserve, is also scheduled to speak.
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