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The dollar remains on a positive trajectory for a third week in a row, with the dollar index (USDX) adding approximately 1% to its value in the past week, trading close to levels last seen early in December. The move is backed by Friday’s reports as the Michigan University preliminary consumer sentiment report came in better than expected, marking the highest reading since July 2021, adding to signs of resilience in the US economy.
On Friday, several Fed officials expressed their concerns on early rate cuts, among which Chicago Fed President Austan Goolsbee, who said weeks more of inflation data need to be in hand before any decision could be made to cut interest rates. In addition, Federal Reserve Bank of San Francisco President Mary Daly said there is still a lot of work left to do on inflation and it is premature to think rate cuts are around the corner.
Gains in the dollar and signs of resilience in the US economy and rising treasury yields continue to add pressure on gold prices, with the precious metal losing around 1% of its value in the past week. However, the decline in gold remains limited due to its safe haven properties, as geopolitical turmoil in the Middle East continues.
The main US stock market indices all ended in gains for yet another week, posting fresh all-time highs daily, with investors now focusing on fourth quarter earnings in the technology sector and the direction of the U.S. dollar. In company news, United Airlines publish their quarterly earnings today while later this week, some major players such as Tesla, General Electric, Netflix, IBM, Intel, Visa and American Express will also release their quarterly data.
For Monday, some price action could be seen later in the session, upon the release of the CB Leading Index from the U.S. Later this week, the focus could shift towards the ECB and BOJ interest rate decisions as well as US advanced GDP data and the Core PCE Price index that is considered to be the Fed’s favorite gauge for inflation.
The EUR/USD pair ended the session on Friday higher as the Euro stepped broadly higher as market sentiment recovered its footing in the last day of trading for the week.
Europe got a break from the economic calendar this past week with most markets focused on headlines from the World Economic Forum (WEF) in Davos, Switzerland. The European Central Bank's (ECB) January monetary policy meeting on Thursday will be a closely watched event by market participants.
On the other hand, markets have become less convinced that the Federal Reserve (Fed) will cut the interest rate in March after the US economic data last week, including Retail Sales and Consumer Sentiment Index showed an improvement in the US economy.
Gold prices posted minor gains on Friday but were nursing steep declines for the week as growing doubts over early interest rate cuts by the Federal Reserve battered the precious metal. Gold was battered chiefly by investors pivoting into the dollar as strong economic data and hawkish-leaning comments from Fed officials saw markets further price out expectations for a March rate cut by the central bank.
But the precious metal still saw some support from safe-haven demand, as a military conflict in the Middle East escalated to new avenues. While U.S. and UK forces continued to clash with the Iran-led Houthi group in the Red Sea, tensions grew between Iran and Pakistan after a series of strikes.
Oil prices settled slightly lower on Friday but recorded a weekly gain as Middle East tensions and disruptions to oil output offset concerns about the Chinese and global economies.
In China, slower-than-expected economic growth in the fourth quarter raised doubts about forecasts that demand there will drive global oil growth in 2024. Tensions escalated in Gaza as Israeli forces pushed south against Hamas militants, while earlier in the week, the U.S. launched new strikes against Houthi anti-ship missiles aimed at the Red Sea.
In the U.S., about 30% of oil output in North Dakota, the country's third largest producing state, remained shut due to extreme cold, the state's pipeline authority said on Friday.
U.S. stocks were higher after the close on Friday, as gains in the Technology, Financials and Telecoms sectors led shares higher.
At the close in NYSE, the US 30 gained 1.03% to hit a new all-time high, while the US 500 climbed 1.16%, and the US Tech 100 1.70%.
Apple , Google , Microsoft and Meta led the gains in big tech as investors continued to load up on megacap tech amid ongoing optimism that growing demand for artificial intelligence will continue spur growth.
The University of Michigan's preliminary consumer sentiment index jumped by more than expected to a reading of 78.8 in January, the highest since July 2021.
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