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26/07/2024 - 07:45 UTCThe dollar showed little change against most major currencies on Thursday, with the dollar index (USDX) trading within a tight range between levels 103.85 and 104.31 since the beginning of the week. The dollar was partly supported by better-than-expected GDP numbers reported on Thursday, however, that did not dent expectations that the Federal Reserve will proceed with an interest rate cut in September thus maintaining downward pressure on the greenback. Investors now await crucial U.S. inflation figures scheduled for release later today, which could serve as a catalyst for the Fed’s next move.
Market expectations for a Federal Reserve interest rate reduction in September fell from 93.6% seen earlier this week to 87.7% according to CME FedWatch. Expectations for a subsequent rate cut in November stand at 58.4%.
In other news, the top two cryptocurrencies by market cap, Bitcoin and Ethereum have reached monthly lows on Thursday. The move was partly attributed to to risk-averse sentiment stemming from the US stock exchange's downturn and uncertainty surrounding the presidential election. Nonetheless, early on Friday, Bitcoin and Ethereum recovered some measure of the losses as crypto markets await an address by Republican presidential nominee Donald Trump at the Bitcoin Conference this weekend.
Notwithstanding the expectation of an imminent September rate reduction, the three primary U.S. stock market indices experienced another downturn on Thursday, primarily driven by underwhelming second-quarter financial results from tech megacaps Alphabet and Tesla. Alphabet's stock plummeted over 3% on Thursday, adding pressure on the tech sector's recovery as investors fretted about intensifying competition from OpenAI's forthcoming AI-powered search engine. Open AI announced plans to challenge Google's search dominance with its own AI-driven search platform. In contrast, IBM's shares surged more than 4% after the company indicated increased demand for its AI solutions and upwardly revised its annual cash flow projections.
In the spotlight for Friday is the long awaited Core PCE Price index where economists are expecting a 0.1% increase for the second straight month, which would bring three-month annualized core inflation down to the slowest pace this year, below the Fed’s 2% target.
Following three consecutive days of losses, the euro posted a slight recovery against the dollar on Thursday, with the EUR/USD pair closing the session 0.12% higher. Recovery in the euro was pressured by US data showing gross domestic product grew 2.8% in the second quarter, versus forecasts of a 2% growth, and an improvement from the 1.4% growth seen in the first three months of the year.
However, indications of easing inflation might fuel expectations of multiple rate cuts by the Fed this year, beginning in September, thus adding pressure on the dollar.
Later today, investors focus could turn to the Core PCE price index where a second consecutive 0.1% rise is expected, marking the lowest three-month annualized core inflation of the year.
Gold prices experienced a sharp decline of 1.45% on Thursday, as seen on the iFOREX platform, pressured by growth data from the US that supported the dollar.
The yellow metal may see some safe haven demand deriving from uncertainty over the U.S. presidential race, as recent polls indicate a close race between Republican nominee Donald Trump and Democratic frontrunner Kamala Harris.
Markets are eagerly anticipating the release of the personal consumption expenditures data for June on Friday, in hopes of gaining valuable clues regarding the Federal Reserve's interest rate cut trajectory.
Oil prices closed higher on Thursday, for a second consecutive session with the two main benchmarks WTI and Brent up by 1.03% and 1.13%. According to reports, the move stemmed from data showing the U.S. economy had grown at a faster-than-expected rate during the second quarter, indicating growing demand in the near future.
Nevertheless, price levels continue to be impacted by the ongoing ceasefire negotiations between Israel and Hamas, coupled with fears of a Chinese economic slowdown, which could curb global oil consumption
The US 500 and US Tech 100 continue to lose ground, hitting multi week lows, as disappointing results from Alphabet and Tesla continue to weigh on investor confidence.
Alphabet shares took a significant hit, plunging over 3% on Thursday, making the tech sector's efforts to rebound more difficult. Investor concerns intensified over the looming threat from OpenAI's AI-powered search engine. The startup's declaration of a direct challenge to Google's search dominance sent shockwaves through the market.
Aside from key inflation data due later today, the focus on technology earnings will persist next week with reports scheduled from Microsoft on Tuesday and Apple on Thursday. Additionally, Advanced Micro Devices Inc., Qualcomm Incorporated, and Amazon.com Inc. are all slated to release their earnings results during the coming week.
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