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02/08/2024 - 07:55 UTCThe dollar posted a mild recovery against most major currencies on Thursday, with the dollar index (USDX) up by 0.29% to cross above the 104.0 mark once again. Pressure on the dollar remains after the Federal Reserve held rates steady but opened the door for an interest rate cut in September as inflation cools.
Despite inflation remaining above target, the Fed acknowledged a decrease in inflationary pressures and growing concerns about the labor market. According to Goldman Sachs economists, this suggests the bar for a rate cut in September may be relatively low. The economists further predict a positive July inflation report (forecasting a specific decline in core CPI and PCE) and believe even moderate data could solidify a September rate cut. The official July inflation data is scheduled for release on August 14th.
Recession worries resurfaced on Thursday, driving the US 500 sharply lower. The tech sector mirrored the broader market's downturn, despite Meta Platforms rallying nearly 5% on strong earnings and optimistic outlook.
In the cryptos space Bitcoin and Ethereum, the top two cryptocurrencies by market capitalization, plunged this week, showing losses of almost 5% and 3% respectively as market sentiment was dampened by concerns over a potential $2 billion Bitcoin liquidation by the U.S. government, uncertainty surrounding the US elections and weak economic readings from the U.S. and China. The overall crypto market capitalization stands at less than 2.4 trillion dollars, from 2.55 trillion seen earlier this week.
On Friday, the spotlight will be on US Employment data for July which is expected to show that employers added 175,000 jobs during the month, while the unemployment rate is expected to stay steady at 4.1%.
On Thursday, the EUR/USD currency pair fell below the 1.0800 level, reflecting a decline driven by disappointing US Purchasing Managers Index (PMI) figures.
The latest US Initial Jobless Claims for the week ending July 26 rose to 249,000, exceeding the previous week's 235,000 and surpassing the expected 236,000. Additionally, the US ISM Manufacturing PMI for July dropped to an eight-month low of 46.8, down from 48.5, contrary to forecasts of a slight increase to 48.8.
With limited significant economic data from Europe for the remainder of the week and little expected next week, market attention is now firmly on the upcoming US Nonfarm Payrolls (NFP) report for July.
As the market continues to weigh these mixed signals, all eyes are on the upcoming NFP report and its implications for future Federal Reserve policy decisions.
On Thursday, gold prices remained almost unchanged after reaching a two-week high earlier in the session, as market attention shifted to the upcoming US non-farm payrolls report. The dip in gold prices comes despite earlier gains driven by expectations of potential interest rate cuts from the US Federal Reserve in September and increased safe-haven demand.
During its recent policy meeting, the Federal Reserve decided to keep interest rates steady. However, Fed Chair Jerome Powell indicated that a rate cut could occur as soon as September if the US economy follows the expected trajectory. Traders and investors are now keenly awaiting Friday's US payrolls data for further insight into the Federal Reserve's policy direction.
Oil prices fell significantly on Thursday, as global supply remained largely unaffected despite concerns of a broader Middle East crisis following the death of a Hamas leader in Iran. Investors shifted their focus back to demand issues, pushing prices lower.
This decline followed a sharp 4% rise in the previous session, spurred by fears of escalating conflict after the killing of Ismail Haniyeh, a Hamas leader, in Tehran. This incident came shortly after the death of Hezbollah's senior military commander in Beirut.
A recent meeting of top OPEC+ ministers resulted in no changes to oil output policy, including the plan to start easing one layer of output cuts from October. As per the policy agreed upon in June, some OPEC+ members will gradually reduce cuts totalling 2.2 million barrels per day from October 2024 to September 2025. The group also extended existing cuts of 3.66 million barrels per day until the end of 2025.
U.S. stock index futures fell on Thursday, continuing the losses from a sharp decline on Wall Street. Concerns over slowing economic growth remained prevalent as investors anticipated the upcoming nonfarm payrolls data.
Despite positive earnings from Apple Inc. sentiment in the market remained subdued. Other major companies, including Amazon.com Inc. and Intel Corporation, reported disappointing quarterly results and offered cautious outlooks.
Heavy losses in technology stocks were a significant factor, exacerbated by profit-taking and the realization that the benefits from artificial intelligence may take longer to materialize than initially expected.
Investors are now focused on the upcoming nonfarm payrolls data, which is expected to provide further insights into the labor market amid rising concerns about a potential U.S. economic slowdown.
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