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24/08/2023 - 07:28 UTCThe U.S dollar was temporarily gaining against most major currencies early on Wednesday, only to reverse and drop 0.23% below its daily opening price, raising questions on whether the current uptrend is nearing its end. A very similar move was observed against emerging market currencies with the USD/ZAR declining by 1.69% for the day, the USD/CNH down by 0.25%, the USD/INR falling by 0.35% and the USD/MXN posting a 0.69% decline.
The negative trend in energy prices continues Wednesday despite the recent weakness displayed in the dollar, with WTI and Brent ending the day down by 1.28% and 0.98% respectively. A series of weak PMI readings spurred concerns over slowing economic growth, likely hitting future global demand while data on Wednesday showed an unexpected, substantial build in U.S. gasoline and distillate inventories over the past week, which pointed to weakening U.S. fuel demand.
Precious metals prices surprised investors on Wednesday with an unexpected increase, following a series of daily declines since the beginning of the month, supported by a sudden drop in the dollar as well as weaker-than-expected U.S. business activity data that support a scenario where the Federal Reserve will have limited headroom to keep raising interest rates. Gold prices rose by almost 1.00% for the day while the price of silver added a substantial 3.81% to its value.
The main US stock indices gained sharply on Wednesday, with the US 500 up by 1.56%, the US 30 rising by 0.49% and the US tech 100 surging 2.48% higher. Risk sentiment was boosted following a quarterly report by the world's most valuable chipmaker Nvidia showing solid earnings as well as rising expectations soft economic data will prompt central banks to end their rate-hiking cycles. Nvidia also presented consensus-beating guidance for the third quarter as the world’s most valuable chipmaker benefited from a boom in artificial intelligence development.
Some price action could be seen later today as weekly jobless claims and durable goods orders are reported from the US while later in the session, attention could possibly turn to the Jackson Hole economic symposium for possible clues on central bankers’ interest rate outlook. ECB President Christine Lagarde and Bank of England Governor Andrew Bailey are scheduled to speak on Friday at the Federal Reserve’s Jackson Hole symposium.
The EUR/USD pair posted gains of 0.18% on Wednesday amid a weaker US Dollar. After the release of the Eurozone’s preliminary August PMI’s Euro dropped but rebounded after the release of US Data.
In Eurozone, the Composite PMI dropped from 48.6 to 47, below the expected 48.5. Surprisingly, the Services PMI fall to 48.3, while the Manufacturing PMI positively surprised by rising from 42.7 to 43.7.
In the US, data released on Wednesday showed a decline in the S&P Global Composite PMI from 52 to 50.4, and the Manufacturing PMI dropped from 49 to 47, contrary to expectations of a modest increase to 49.3. The Services PMI also fell from 52.3 to 51. Moreover, New home sales increased to 714K and Building Permits to 1.443M.
Gold prices posted a sharp increase on Wednesday, posting gains of 1.02% reaching near to a two-week high, after a pullback in U.S bond yields and the dollar as market participants looked ahead to the Jackson Hole symposium for guidance on interest rates.
Benchmark 10-year Treasury yields slipped from near 16-year highs hit in the previous session, while the dollar fell after weak U.S. PMI data, making gold more attractive for other currency holders.
Oil prices dropped on Wednesday with WTI contract on iForex platform ending the session 1.18% lower as a build in U.S gasolin stocks and weak manufacturing data globally outweighed optimism around a larger-than-expected drop in U.S crude stockes.
U.S. crude inventories fell by 6.1 million barrels in the week to Aug. 18, the Energy Information Administration said, helped by strong refining activity and high levels of exports. Manufacturing data from a host of purchasing managers' index (PMI) surveys painted a grim picture of the health of economies across the globe.
Market participants are also looking for hints on the outlook for interest rates when Federal Reserve officials and policymakers from the European Central Bank (ECB).
U.S. stocks were higher after the close on Wednesday, as gains in the Technology, Financials and Industrials sectors led shares higher. US main indexes posted a sharp increase on Wednesday, with US 500 and US Tech 100 ending the day 1.56% and 2.48% higher respectively, while US 30 increased by 0.49%.
Market participants were encouraged as the U.S 10 year treasury yield fall after weak business activity data from the U.S and the Eurozone. U.S. Federal Reserve Chair Jerome Powell's comments on Friday at the Jackson Hole conference will be scrutinized for clues on the U.S. central bank's interest rate path.
Nvidia reported Wednesday better-than-expected second-quarter results and upbeat guidance as the race to adopt generative artificial intelligence continues to bolster demand for its chips.
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