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04/03/2024 - 09:00 UTCThe dollar posted a moderate decline against most major currencies on Friday, with the dollar index (USDX) ending the week almost unchanged, following the release of weak U.S. manufacturing data amid declining new orders and a drop in construction spending, which had been expected to increase.
Despite weakness shown in US fundamentals, the CME Fedwatch tool indicates an increase in the possibility for the first rate cut in 2024 to take place in the June FOMC meeting, as chances rose from 51.9% to 58.5%.
In other news, the yen appears to be losing ground against the dollar after BOJ’s Ueda stated that it’s too early to conclude on whether inflation is close to the central bank's 2% inflation target and stressed the need to scrutinize more data on the wage outlook. This statement contrasts comments from BOJ board member Hajime Takata who said last week that the central bank must reconsider its ultra-loose monetary policy.
Sentiment in Wall Street remains strong, with all three main stock indices rallying to record highs on Friday on sustained support from the A-I led rally in technology stocks, while signs of weakness in US fundamentals, seem to boost bets that the Federal Reserve will cut interest rates in June this year.
In company news, several key market players will announce their Q4 earnings reports this week, among which are Sea, Target, NIO, CROWDSTRIKE, ChargePoint, Bionano Genomics, JD.com, INOVIO, Bilibili, Kroger, Broadcom, DocuSign, MongoDB, Costco and Oracle.
In the spotlight for this week is a vote by fifteen U.S. states on the Presidential Primaries due on Tuesday. Expectations are that we will see a rematch between President Joe Biden and his predecessor Donald Trump. In addition, much of this week’s focus could turn to testimonies by Fed’s chairman before a House Committee on Wednesday and a Senate panel on Thursday. Powell is expected to repeat the Fed’s cautious stance on keeping interest rates steady, a notion that was also supported by several Fed officials over the past two weeks.
Other key events that could determine price action this week include the ADP employment data, a monetary policy decision by the ECB, Non-Farm Payrolls and the U.S. unemployment rate.
The EUR/USD pair rebounded on Friday ending the session 0.28% higher and for a second consecutive week the pair posted gains.
In U.S. the ISM Manufacturing Purchasing Managers Index declined, flubbing forecasts, and stepping deeper into contraction territory.
On the other hand, the European Harmonized Index of Consumer Prices (HICP) inflation fell less than expected in February, helping to provide some sentiment support for the Euro (EUR) on Friday. EU inflation was revealed with figures edging lower but exceeding economists' forecasts. The EU Harmonized Index of Consumer Prices (HICP) rose 2.6% YoY above estimates of 2.5%.
On Thursday, the European Central Bank (ECB) will announce its interest rate decision, with no change in rate expected.
Gold started March on a positive note, with prices rising to a two-month high on Friday after muted economic data hardened expectations of a U.S. interest rate cut by June. Gold prices posted a sharp incline ending the day on Friday with gains of 1.92%.
Gold’s gains were driven by some soft U.S. economic data spurring bets that the Fed will cut interest rates by June. But anticipation of more cues from the central bank saw traders once again step back from big bets on the precious metal.
Oil prices rose almost 2% on Friday and posted weekly gains as traders awaited an OPEC+ decision on supply agreements for the second quarter while also weighing fresh U.S., European and Chinese economic data.
A decision on extending OPEC+ cuts is expected in the first week of March, sources have said, with individual countries expected to announce their decisions.
Meanwhile, geopolitical tension in the Red Sea also lifted prices on Friday. The leader of Yemen's Houthis said on Thursday the group would introduce military "surprises" in the region.
U.S. stocks rose on Friday, with the US 500 and US Tech 100 closing at record highs, as technology stocks rallied on continued enthusiasm for artificial intelligence, with further support from declining Treasury yields. US Tech 100 ended the session of Friday with gains of 1.52% while US 30 and US 500 posted gains of 0.33% and 0.93% respectively.
The gains marked the second straight closing record for the US Tech 100, which also set an intraday record as AI-related names such as Nvidia and Meta Platforms.
Markets have drawn support from a resilient economy, as investors have tried to gauge the timing of the first interest rate cut by the Federal Reserve, with investors currently targeting June and growing expectations the central bank can engineer a soft landing for the economy.
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