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09/02/2024 - 09:10 UTCThe dollar posted some gains against most major currencies on Thursday, with the dollar index (USDX) making another move towards the 10-week highs hit earlier this month. According to reports, part of the move could be attributed to Thursday’s jobless claims report that points to a resilient U.S. labor market, reinforcing the Federal Reserve's latest statements that rate cuts might be delayed more than initially expected. The next major catalyst for the dollar is January's Consumer Price Index (CPI) reading of inflation on Feb. 13.
According to CME’s FedWatch tool, the likelihood of a rate cut in March slipped to 17.5%, about half expectations of 36.5% seen a week ago, while chances for the first rate hike taking place in May are at 50.3%.
On Thursday, Wall Street saw a rather quiet session with all three main US stock market indices little changed, still trading at record high levels. According to market analysts, support deriving from robust earnings reports surpassing profit expectations is still the primary driver for prices for the time being. Some of best performers of the session were Walt Disney Company which rose more than 11% to trade above $110, McDonald’s Corporation that added 1.58%. Fourth quarter earnings from Pepsico are due to be reported later in the session.
Energy prices gained on Thursday with the two main benchmarks Brent and WTI rising by around 3% on the back of concerns for broadening of the Middle East conflict after Israel rejected a ceasefire offer from Hamas. In the U.S., a higher than anticipated decline in gasoline inventories stocks also provided a boost to energy markets.
Some price action could be observed later in the day upon the release of monthly industrial production from Italy, employment change and unemployment rate from Canada. The primary focus for investors is shifted to next week’s U.S. inflation data (CPI) that could shed some light on the possibility for a rate cut in March.
The EUR/USD pair advanced marginally on Thursday and managed to end the session with minor gains for a third consecutive day.
The European Central Bank (ECB) Chief Economist, Philip Lane, stated on Thursday that data suggest near-term disinflation is occurring faster than expected, but further progress is required to get to the 2% goal. Meanwhile, ECB Governing Council member Pierre Wunsch said that there were some hopeful signs on wages, but not enough for the ECB to start rolling back restrictive policies.
On the other hand, Investors continued to assess the likelihood of the Federal Reserve (Fed) initiating its easing cycle at either the May or June gatherings. Thomas Barkin suggested on Thursday that upcoming inflation readings are likely to be favourable.
Gold prices edged lower on Thursday ending the session 0.11% lower, hurt by a stronger dollar and elevated bond yields as hopes for an early interest rate cut from the U.S. Federal Reserve diminished, while palladium extended its decline on a dim long-term demand outlook.
Several Fed speakers on Wednesday gave a range of reasons for feeling little urgency to start easing policy in the United States soon, or to move quickly once they do.
Traders now see about 61% probability of an interest rate cut from the Fed in May, according to the CME Fedwatch tool. Lower interest rates decrease the opportunity cost of holding non-yielding bullion.
Oil prices gained more than 3% on Thursday on concerns of a broadening conflict in the Middle East after Israel rejected a ceasefire offer from Hamas.
The ongoing violence in the Middle is set to continue, keeping the risk of crude supply disruptions front and centre. Still, bigger gains in oil prices were held back by weak economic signals from top importer China.
In the U.S., a stronger than expected drawdown in gasoline and middle-distillate stocks also buoyed the oil market. Moreover, in Russia, damage to refineries from Ukraine's drone attacks and technical outages led to more crude exports than planned in February.
U.S. stocks were higher after the close on Thursday, as gains in the Oil & Gas, Consumer Services and Consumer Goods sectors led shares higher. At the close, the US 30 rose 0.04% to hit a new all-time high, while the US 500 gained 0.03%, and the US Tech 100 climbed 0.14%.
Shares of Walt Disney rose 11.5% after the media giant's profit beat Wall Street estimates. PayPal shares sank 11.2% after a forecast of flat growth in adjusted profit for the current year, dragging on the S&P 500 financial sector. More than half of the S&P 500 companies have reported quarterly earnings, with 80.6% surpassing expectations, compared with a long-term average of 67%, according to LSEG data.
On the economic data front, the number of Americans filing new claims for unemployment benefits fell slightly more than expected last week, suggesting underlying labour market strength.
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