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29/01/2024 - 08:31 UTCThe dollar showed little change against most major currencies on Friday, with the dollar index (USDX) ending the session 0.03% lower after the latest core PCE price index which showed a minor increase in monthly inflation as expected. The annual inflation rate was under 3% for the third straight month with the Fed closely monitoring the PCE price measure for its 2% inflation target.
According to the CME Fedwatch tool, the markets price in a 47.7% possibility that the 1st rate cut in 2024 will take place in the March FOMC meeting, while the possibility for an additional rate hike taking place in May is at 37.6%.
The main stock market indices continue to trade steadily near recently reached record highs, following the latest inflation data reported in the US and ahead of key employment data due later this week. Fourth quarter earnings are also in focus, with some key market players publishing their quarterly results this week, among which are Amazon, Alphabet, Microsoft, Pfizer and United Parcel Service.
Oil prices surged once again on Friday, with the two main oil benchmarks WTI and Brent, closing the week with gains of more than 6% of their value, amid rising geopolitical turmoil in the Middle East, after a drone attack on U.S. forces in Jordan added to worries over supply disruption in the region. On Feb. 1st, the focus could turn to an online meeting by leading ministers from OPEC and allies, where the group could decide its oil production levels for April and beyond.
Key employment releases in the week ahead, among which are the ADP Non-Farm Employment Change, the US Non-Farm Employment report and the unemployment rate, could have a meaningful impact on prices. Investors will also be watching closely for any surprises in the Fed’s first meeting in 2024, where the central bank is widely expected to keep rates on hold.
The EUR/USD pair recovered some losses on Friday, but overall gains remained limited after German Consumer Confidence backslid to almost a one-year low as economic conditions in Europe remain tepid at best.
US Personal Consumption Expenditure (PCE) Price Index inflation figures eased more than expected, but further gains in December’s Personal Spending alongside an unexpected uptick in Pending Home Sales trimmed rate cut expectations.
The Fed’s preferred gauge for inflation, the Personal Consumption Expenditures (PCE), rose 2.6% in the 12 months to December, as expected on an annual basis, while core PCE dipped from 3.2% to 2.9% and below forecasts.
Ahead of the next week, the main spotlight would be the Federal Reserve’s monetary policy decision on January 30-31.
Gold prices held steady on Friday ending the session with minor losses as investors' attention shifted to the U.S. Federal Reserve's policy meeting due next week for more insights into the interest rate outlook.
Markets widely expect the Fed to leave interest rates unchanged at its policy meeting on Jan. 30-31, but have pared back expectations of a rate cut by March, according to the CME FedWatch Tool, opens new tab.
U.S. prices rose moderately in December, keeping the annual increase in inflation below 3% for a third straight month, which could allow the Fed to start cutting interest rates this year.
Oil prices settled higher Friday to end the week at nearly two-month highs as healthy U.S. economic growth and signs of Chinese stimulus supported the crude demand outlook, prompting bullish bets on crude, while Middle East supply concerns added support.
Both benchmarks made weekly gains of more than 6%, marking their biggest weekly increase since the week ending Oct. 13 after the start of the Israel-Hamas conflict in Gaza.
U.S. stocks were mixed after the close on Friday, as gains in the Oil & Gas, Healthcare and Consumer Services sectors led shares higher while losses in the Technology, Industrials and Basic Materials sectors led shares lower. At the close in NYSE, the US 30 rose 0.33% to hit a new all-time high, the US 500 rose 0.04%, and the US Tech 100 fell 0.09%.
The "core" personal consumption expenditures price index, which is the Fed's preferred inflation gauge and excludes volatile items like food and fuel, slowed to a 2.9% pace in December, from 3.2% a month earlier, below economists' estimates of 3%.
Tech giant Intel tumbled 11.9% to a six-week low after it gave a revenue forecast that badly missed estimates as it plays catch-up in the AI race while also dealing with a weak PC market. American Express stock rose 7% after the credit card giant beat full-year profit expectations, even as it raised its loan loss provisions, bracing for a jump in potential loan defaults.
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