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18/04/2024 - 08:33 UTCThe dollar posted a moderate decline against most major currencies on Wednesday, with the dollar index (USDX) losing approximately 0.39% and retreating from five-month highs. According to reports, this move could be driven by profit taking, despite fears that interest rates could remain unchanged for longer than expected. Further pressure in the dollar derived from improved sentiment amid a lack of immediate escalation in Iran-Israel tensions.
With recent developments in the economic, political and geopolitical fronts, bets for the first rate cut to occur in June rose marginally from 15% to 16.5% according to CME Group's FedWatch tool.
In other news, the two main crude oil benchmarks WTI and Brent posted sharp declines of around 3% on Wednesday as no escalation was yet seen in tensions between Iran and Israel. Further pressure on the energy came from concerns for higher-for-longer U.S. interest rates and while a bigger-than-expected build in U.S. inventories.
In Wall Street, sentiment was negative in the past few sessions, with all three main indices ending in the red, as positive earnings reports are being largely offset by the lack of confidence that monetary easing will come any time soon and the possibility of a wider conflict in the Middle East.
NVIDIA Corporation fell sharply during its last session, losing nearly 4% of its value, but then rose by about 0.5% in aftermarket trade. Smaller peer Advanced Micro Devices Inc was also dumped, losing 5.8% of its value. Video streaming giant Netflix Inc is set to report first-quarter earnings on Thursday, as is Casino operator Las Vegas Sands Corp which fell 3% despite beating profit expectations, as underperformance in its Macau operations remained a point of concern. Other key earnings reports due this week include Intuitive Surgical, Procter & Gamble, American Express and Schlumberger.
Market focus for today shifts to the eurozone current account report, US unemployment claims, the Philly Fed manufacturing index, existing home sales and speeches from several Fed members among which are, Bowman, Williams, Bostic and Martin.
The EUR/USD pair rebounded on Wednesday after the release of the final estimates for Eurozone March Inflation data ending the session 0.45% higher.
The final reading of the Harmonized Index of Consumer Prices came out in line with the initial estimates at 2.4% year-on-year. The ECB policymaker Joachim Nagel said on Wednesday that a rate cut looks increasingly likely for June, but certain parts of the incoming inflation data still look higher than desired.
The dollar on Wednesday fell as investors consolidated gains after Federal Reserve officials repeated the interest rate-cutting cycle is on hold pending new economic data, while the monetary easing outlook for other major central banks remained unchanged.
For Thursday market participants turn their focus to the usual weekly Initial Jobless Claims, the Philly Fed Manufacturing Index, the CB Leading Index, and Existing Home Sales.
Gold prices climbed on Wednesday, as risks of a widening Middle East conflict raised bullion's safe-haven appeal, overshadowing pressures from higher-for-longer U.S. interest rates.
Pressure from the dollar also eased slightly this week as the greenback retreated from over five-month highs on Wednesday. But the prospect of higher-for-longer interest rates saw gold take little advantage of this weakness.
Oil prices settled down 3% on Wednesday, pressured by a rise in U.S. commercial inventories, weaker economic data from China and U.S. progress on Ukraine and Israel aid bills.
U.S. crude inventories rose by 2.7 million barrels to 460 million barrels last week, government data showed, nearly double from analysts' expectations.
While Israel is expected to act against Iran's recent drone and missile attack over the weekend, many expect the response from Tel Aviv will likely be measured. The easing fears of an escalation between Iran and Israel skirmishes forced traders to unwind bets somewhat of a wider war in the Middle East that would have threaten global crude supplies.
U.S. stocks were lower after the close on Wednesday, as losses in the Technology, Industrials and Consumer Services sectors led shares lower.
At the close in NYSE, the US 30 declined 0.40%, while the US 500 fell 0.78%, and the US Tech 100 lost 1.39%.
Wall Street indexes fell for a fourth consecutive session on Wednesday, hit by steep losses in chipmaking stocks following weaker-than-expected earnings from Dutch semiconductor technology giant ASML Holding NV.
Focus was now squarely on upcoming earnings reports. Earnings from TSMC, the world’s largest contract chipmaker are due today. Video streaming giant Netflix Inc is also set to report first-quarter earnings on Thursday.
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