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07/11/2023 - 09:22 UTCThe U.S. dollar started off this week on a positive note against most major currencies, with the dollar index (USDX) up by almost 0.35% for the week as of Tuesday 08:40 AM GMT. The dollar is still under significant pressure and trading way below the high of 107.0 reached earlier this month due to recent indications by the Federal Reserve that suggest a possible ending to the central bank’s rate hiking cycle.
According to the CME Group Fed Watch Tool, the possibility that rates will remain unchanged in December fell from 90.4% on Monday to 85% on Tuesday, while there is still a 15% chance for a rate hike.
On the European front, evidence of weakness in the region came after monthly German industrial production numbers fell by 1.4%. This followed on from a revised 0.1% fall the prior month and indicates that the eurozone economy is dealing with some difficulties. Eurozone September producer prices are due later today, and are expected to rise 0.5% on the month, a 12.5% drop on an annual basis.
The Germany 40 that tracks the performance of the DAX future is starting to trend lower this week, losing 0.47% of its value early on Tuesday. There is a series of ECB speeches, including one from President Christine Lagarde on Friday that could shed some light on the path forward.
In today’s calendar, CNH Industrial, Uber, Datadog, Robinhood Markets, Occidental Petroleum, Coupang, Gilead Sciences, eBay and Upwork are scheduled to release their quarterly earnings reports.
The main highlight for this week is the nine Fed members’ testimonies this week, including two appearances by Chair Jerome Powell. On Tuesday’s FOMC members Barr, Logan, Kashkari, Waller Goolsbee and Kozicki are due to speak later in the day while consumer credit and trade balance figures are also due. Fed Chairman Jerome Powell is expected to speak on Wednesday and Thursday, and traders will be on watch for possible monetary policy related hints.
The EUR/USD pair is seeing fresh selling pressure as the renewed upside in the US Dollar and a return of risk-off flows are exerting downward pressure on the pair.
Federal Reserve (Fed) officials offered a mixed signal over the future rate-hike path, which, in turn, led to a goodish move up in the US Treasury bond yields on Monday and prompted some USD short-covering move.
In the meantime, the European Central Bank (ECB) President Christine Lagarde's hawkish remarks over the weekend continue to underpin the shared currency and help limit the downside for the EUR/USD pair.
Market participants now look to the release of Chinese Trade Balance data, which might influence the broader risk sentiment and German Industrial Production for some impetus ahead of the US Trade Balance data. Apart from this, traders will take cues from speeches by a slew of influential FOMC members.
Gold prices retreated on Monday as U.S. Treasury yields rose, with investors remaining cautious as they gear up for a host of Federal Reserve speakers this week including Jerome Powell for clarity on U.S. rate cuts.
Risk appetite is a bit better and there have been no major surprise developments from the Israel-Hammas war, and this is taking away a little bit of the safe-haven bidding for gold.
Oil prices rose Monday but did not manage to keep the upside trend by the end of the session. The market is rebounding after both benchmarks lost about 6% last week, as traders priced in a much lower risk premium from the Israel-Hamas war, given that fears of supply disruptions in the Middle East have not materialized. Israel has rebuffed mounting international pressure for a ceasefire, but a U.S. diplomatic blitz in the region has so far contributed towards the conflict escalating.
Crude markets were now focused squarely on key economic readings from China, due later in the week. Chinese trade data is due on Tuesday and is expected to provide more cues on commodity demand in the country.
U.S. stocks were slightly higher after the close on Monday, as gains in the Technology, healthcare and Consumer Services sectors led shares higher. Market Participants awaited guidance from a host of Federal Reserve policymakers later in the week on the central bank's policy path, with a large amount of bond supply also due to hit the market.
Among Earnings, companies including Gilead Sciences Inc, Uber Technologies Inc, UBS Group AG, Occidental Petroleum Corporation and Air Products and Chemicals Inc are scheduled to report quarterly results.
Ahead in Tuesday’s trade, market participants will remain closely focused on monthly trade balance data, as well as speeches from Barr, Waller, Williams, and Logan.
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