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01/07/2024 - 07:30 UTCThe U.S. dollar traded moderately lower against most major currencies on Friday, giving back most of the gains seen in the beginning of the week, with the dollar index (USDX) closing in on the 105.0 mark. The move came after Friday's PCE numbers revealed US inflation easing, prompting investors to anticipate interest rate cuts by the Fed later this year. Data showed the U.S. personal consumption expenditures (PCE) price index, the Fed's preferred inflation measure, was unchanged last month, and followed an unrevised 0.3% gain in April, data showed. In the 12 months through May, the PCE price index increased 2.6% after advancing 2.7% in April.
According to widely cited CME Fedwatch tool, a September rate cut is the most likely scenario with chances at 57.0% while for November, the possibility stands at around 49.7%.
In the energy sector, the two main benchmarks WTI And Brent, both rose by around 6% in June, as the Organization of the Petroleum Exporting Countries (OPEC) and their allies, a group known as OPEC+, extended most of its deep oil output cuts well into 2025. This triggered analyst forecasts of supply shortages in Q3, as increased summer demand for transportation and air conditioning depletes fuel reserves.
The main U.S. stock indices retreated from record levels on Friday despite data indicating cooling inflation, with focus this week turned towards comments from Fed officials and Fed chairman Jerome Powell, who is set to speak at the ECB annual forum in Portugal on Tuesday. Wednesday's release of the June meeting minutes could shed light on the Fed’s interest rate strategy, especially after their hawkish stance seen so far. However, if upcoming non-farm payrolls data shows a strong labor market, that could complicate plans for potential rate cuts in the face of inflation concerns.
Some price action could be observed later today upon the release of German preliminary CPI data, U.S. construction spending, manufacturing PMIs from the eurozone and the U.S. and a speech by ECBs president Lagarde.
The EUR/USD pair entered a period of sideways movement on Friday, concluding a week of trading with minimal momentum as market participants lacked compelling reasons to significantly influence the pair's direction.
German Unemployment Change clocked in higher than expected, showing 19K German consumers were added to unemployment figures in June. The German Unemployment Rate also ticked higher to 6.0% versus the forecast hold at 5.9%.
On the U.S. side, the Core PCE Price Index inflation eased to 2.6% for the year ending May, down from the previous 2.8%. Despite the decrease in key inflation indicators, it did not prompt a significant increase in risk appetite among investors, as the figure was not sufficiently low to push the Federal Reserve (Fed) towards a faster pace of interest rate cuts.
The University of Michigan (UoM) Consumer Sentiment Index rose to 68.2 in June, up from the previous 65.6 and climbing over the forecast 65.8.
Gold prices stabilized on Friday and were on track for a third consecutive quarterly increase following a crucial U.S. inflation report that aligned with expectations. This has bolstered optimism regarding the potential for the Federal Reserve to implement interest rate cuts by September.
On Friday, market expectations grew, anticipating that the Federal Reserve may reduce interest rates in September and again in December, prompted by the revelation that the Personal Consumption Expenditures Index showed no increase in inflation from April to May. The PCE data coincided with the unrevised 0.3% rise in April figures from the previous month, while consumer spending exhibited moderate growth.
Oil prices experienced a decline on Friday as investors assessed the subdued U.S. fuel demand and opted to secure some profits at quarter-end. Simultaneously, crucial inflation data for May heightened the likelihood that the Federal Reserve would initiate interest rate reductions within the current year.
Even though U.S. oil production and demand reached a four-month peak in April, gasoline demand dwindled to 8.83 million barrels per day, marking its lowest point since February, according to the Energy Information Administration's Petroleum Supply Monthly report released on Friday.
Wall Street experienced losses on Friday due to the PCE price index data, a crucial inflation indicator for the Fed, indicating that inflation remained persistent in May. In May, inflation in the U.S. slowed down as anticipated compared to the previous month, as per the Federal Reserve's preferred gauge of price hikes, potentially prompting the Fed to implement interest rate reductions in 2024.
On Thursday, Biden seemed to face challenges during the much-anticipated 90-minute debate with Republican opponent Donald Trump. He appeared to encounter difficulties while responding to the moderators' questions.
Nike's stocks plummeted over 17% following the company's announcement to investors that revenue is projected to decrease by 10% in the current quarter.
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