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09/10/2024 - 07:17 UTCThe U.S. dollar is seen trading sideways for the past two daily sessions, following a substantial appreciation to a seven-week high, providing some relief to the Japanese yen and other major currencies. The dollar index (USDX) was down slightly by 0.05% as investors are carefully analyzing the potential future path of interest rates in the United States, which has been a significant driver of the dollar's strength.
Based on the CME's FedWatch tool, the market is currently pricing in a 25-basis-point interest rate cut by the Federal Reserve at its November meeting. This scenario has a probability of 86.7%, while the odds of the Fed keeping rates unchanged are seen at 14.2%.
Major U.S. indexes closed sharply higher on Tuesday, led by a surge in the price of Nvidia as investors swooped in on tech just as the third-quarter earning season got underway. The price of the US 500 rose by almost 1% for the day, the US 30 was up by 0.32% and the US tech 100 gained 1.45%.
In corporate news, Nvidia's stock surged as Foxconn's chairman expressed optimism about demand for servers powered by Nvidia's upcoming Blackwell chip. This boosted sentiment within the broader tech sector. Alphabet's stock was slightly up despite a recent legal setback where a U.S. judge ordered Google to allow rivals to create their own app marketplaces and payment options on Android, a blow to Google's antitrust defense. DocuSign's shares soared after the company announced its upcoming inclusion in the S&P 500 MidCap 400 index, replacing MDU Resources.
On the energy front, crude oil prices experienced a sharp decline with WTI down by over 4% on Tuesday, primarily driven by reports of a potential ceasefire between Hezbollah and Israel, indicating a potential de-escalation of the ongoing conflict in the Middle East. Additionally, waning optimism regarding China's implementation of new stimulus measures to bolster its slowing economy further contributed to the downward pressure on oil prices.
Later today, some price action could be seen upon the release of ahead of Fed minutes that could provide valuable insights regarding the latest interest rate decision.
The EUR/USD pair remained steady on Tuesday, unable to regain the 1.1000 level after its recent slide from the 1.1200 area.
This week, European economic data has been relatively subdued, with attention turning to the European Central Bank’s (ECB) upcoming rate decision next week.
In the US, the Federal Reserve (Fed) will release the Meeting Minutes from its September policy meeting later today. Traders will closely scrutinize the details, particularly after the Fed’s substantial 50 basis point rate cut last month. While there was initial hope for another significant rate cut in November, solid labor market data and inflation running above target have dampened those expectations.
Gold prices dropped sharply on Tuesday after a robust US jobs report and news suggesting Hezbollah's support for a ceasefire in the ongoing Israel-Lebanon conflict.
Interest rate traders adjusted their expectations regarding the Federal Reserve’s (Fed) next move. While most Fed officials have taken a cautious stance on further easing, St. Louis Fed President Alberto Musalem suggested that only one more rate cut is likely by year-end, following September’s 50 basis point reduction.
Oil prices tumbled on Tuesday, dropping over 4% following reports of a possible ceasefire between Hezbollah and Israel. However, concerns about a potential attack on Iranian oil infrastructure provided some support to prices.
Hezbollah signaled a willingness to negotiate a ceasefire after Israeli forces escalated their military activity in southern Lebanon. Israeli Defense Minister Yoav Gallant also indicated that the new leader of Hezbollah, who replaced Sayyed Hassan Nasrallah, may have been eliminated.
Additionally, U.S. crude inventories rose by nearly 11 million barrels last week, according to sources citing data from the American Petroleum Institute. Crude stocks increased by 10.96 million barrels for the week ending October 4, while gasoline inventories fell by 557,000 barrels, and distillate stocks dropped by 2.6 million barrels.
Wall Street’s major indexes closed higher on Tuesday, recovering some of the previous session’s losses, as investors returned to technology stocks and shifted their focus to upcoming inflation data and the start of third-quarter earnings season.
Major tech stocks also rallied, helping both the Nasdaq and S&P 500 close above last week’s levels, though the S&P 500 managed only a fractional gain. Nvidia led the charge among the so-called Magnificent Seven, rising 4.02%, marking its biggest one-day percentage gain in a month. Apple, Tesla, and Meta Platforms also advanced, with gains between 1.4% and 1.8%.
Attention has now turned to Thursday’s consumer price index (CPI) data, which could provide further insight into the Fed’s next steps. Third-quarter earnings are now coming into focus, with major banks scheduled to report on Friday.
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