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20/11/2024 - 08:04 UTCThe U.S. dollar fell moderately against most major currencies on Tuesday, with the dollar index (USDX) retreating to one-week lows despite tensions escalating in Ukraine after an announcement by Russia that it would lower its threshold for a nuclear strike. The initial reaction in markets faded somewhat after Russian Foreign Minister Sergei Lavrov said the country will "do everything possible" to avoid the onset of nuclear war, while showing approval for Germany's decision on Monday not to provide long-range missiles to Ukraine, calling it "a responsible position."
Wall Street sentiment appears positive, with Nvidia's strong performance driving gains in the tech sector. The chipmaker's stock price surged over 4%, making it the world's most valuable listed company. As investors anticipate its earnings report, Nvidia's performance is seen as a key indicator of AI demand and could influence the broader market.
In Asia, the People's Bank of China (PBOC), kept its key interest rates unchanged on Wednesday, signaling a cautious approach to further stimulus until they gain a clearer picture of what a Donald Trump presidency will entail for Sino-U.S. relations. Japan's stock market retreated on Wednesday, with the Japan 225 down 0.4% as of 7:15 AM GMT. The decline was attributed to a wider-than-anticipated trade deficit in October, suggesting persistent domestic demand.
On the cryptos front, Bitcoin broke its all-time high once again on Tuesday, reaching levels right above the $94K mark. According to the financial times, Trump’s social media company is considering a purchase of Bakkt, a cryptocurrency trading platform. This potential deal has sparked optimism among cryptocurrency enthusiasts, who believe it could signal a more favourable regulatory stance towards digital assets
For Wednesday, markets will most likely be focusing on core annual inflation numbers from the UK while later in the day, some price action could be seen upon a speech by ECB’s Lagarde, speeches from key FOMC members and the release of US crude oil inventories.
The EUR/USD pair saw restrained movement on Tuesday, fluctuating between 1.0520 and 1.0600 before recovering modestly to close with a 0.12% gain.
European HICP inflation for October was confirmed at 2.0% year-over-year, aligning with preliminary estimates. This left Eurozone markets largely unfazed, as the data offered little new information for traders.
On Wednesday, European Central Bank (ECB) President Christine Lagarde is scheduled to speak at the ECB’s Conference on Financial Stability and Macroprudential Policy. Across the Atlantic, the U.S. economic calendar remains quiet until the latter half of the week, when Initial Jobless Claims and Retail Sales figures are expected to provide fresh insight.
Gold extended its winning streak, rising 0.85% on Tuesday as heightened geopolitical tensions in the Russia-Ukraine conflict spurred risk aversion.
Geopolitical risks were the primary driver, with Russia launching intensified attacks on Ukraine and U.S. President Joe Biden authorizing the use of American-made long-range missiles in Russia.
In response, Russian President Vladimir Putin reportedly approved a nuclear doctrine, triggering further risk-off sentiment that pressured global equities while boosting both the Greenback and Gold. However, Russian Foreign Minister Sergey Lavrov later stated that his country does not believe a nuclear war will occur, which slightly tempered market anxiety.
Oil prices ticked up modestly on Tuesday as traders balanced concerns over supply disruptions in Norway and Kazakhstan with escalating geopolitical tensions following updates to Russia’s nuclear doctrine.
Oil markets saw a significant 3% rebound on Monday after Norway’s Johan Sverdrup oilfield, the largest in Western Europe, temporarily halted production due to technical issues. Production partially resumed on Tuesday, easing immediate supply concerns. Meanwhile, Kazakhstan’s Tengiz oilfield reduced output by up to 30% for maintenance, expected to conclude by Saturday.
Further bolstering oil prices, Russian President Vladimir Putin revised the country’s nuclear threat policy, allowing for a nuclear strike in response to conventional attacks on Russia or its ally Belarus that pose critical threats to sovereignty.
US 500 and US Tech 100 posted modest gains on Tuesday, mirroring a positive session on Wall Street fueled by strength in technology stocks and upbeat retail earnings.
Technology shares led Tuesday’s gains, driven by a nearly 5% surge in Nvidia during regular trading hours. The chipmaker is seen as a bellwether for artificial intelligence demand, and investor enthusiasm for AI has propelled its stock to nearly triple its value in 2023.
Market sentiment remains cautiously optimistic, though risk appetite showed signs of cooling amid uncertainty over geopolitical tensions and future Federal Reserve policy.
Looking ahead, Nvidia’s earnings report and broader macroeconomic data will likely guide market sentiment, with investors keeping an eye on the evolving geopolitical landscape and potential policy implications.
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