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05/12/2024 - 08:54 UTCThe U.S. dollar traded almost unchanged against most major currencies on Wednesday, with the dollar index down by a mere 0.02%. Investors are cautious ahead of the upcoming US employment numbers where they will gauge the likelihood of a rate cut later this month. Analysts predict 195,000 new jobs in November, but October's data might be revised due to weather, strikes, and low survey participation. The unemployment rate is expected to inch up to 4.2%.
In terms of rate cut expectations, bets for a 25 basis points rate cut, currently stand at 74% according to the CME Fedwatch tool.
All three major U.S. stock indexes reached record highs overnight, fueled by a rally in technology stocks following Salesforce's impressive earnings report. U.S. futures are trading near unchanged levels on Thursday. Investors found some reassurance in Federal Reserve Chair Jerome Powell's speech, where he acknowledged the strength of the U.S. economy and did not rule out a December rate cut. However, he also indicated a more cautious stance towards future easing.
On the cryptos front, Bitcoin crossed the long awaited $100,000 mark on Thursday amid increased optimism over friendly regulations under President-elect Donald Trump, while Federal Reserve Chair Jerome Powell also made a reference to crypto, comparing it with gold. Further support came as Trump chose Paul Atkins to lead the U.S. Securities and Exchange Commission. Atkins is a former SEC Commissioner and is largely pro-crypto.
Later today, OPEC+ will convene online to determine their production policy for 2025. According to sources, the group is expected to prolong its existing oil production cuts for a minimum of three months, starting from January. Oil prices declined ahead of the meeting, with the two main benchmarks WTI crude oil and Brent down by 1.82% and 1.60% respectively.
For Thursday, markets will most likely be focusing on the OPEC-JMMC Meetings, on eurozone retail sales, U.S. jobless claims, US trade balance and the UK construction PMI. For Friday, some price action is expected upon the release of the US Non-Farm Payrolls figures, the unemployment rate and a survey by the University of Michigan on consumer sentiment and inflation expectations.
The EUR/USD pair hovered near the 1.0500 level on Wednesday, pressured by a stronger US Dollar (USD), which benefited from renewed risk aversion. Political instability in France and South Korea weighed on investor sentiment.
The Hamburg Commercial Bank (HCOB) released its final November Services and Composite Purchasing Manager Indexes (PMIs) for European economies, showing mixed results. The European Union also published its October Producer Price Index (PPI), which aligned with expectations.
European Central Bank (ECB) President Christine Lagarde is scheduled to testify before the European Parliament’s Committee on Economic and Monetary Affairs in Brussels.
Gold price advance on Wednesday, sponsored by mixed US economic data. Powell said the US economy is in good shape, adding that September’s rate cut was a message to support the labor market. He said that despite showing progress, it’s premature to declare victory on inflation, and the US central bank could be cautious in setting monetary policy.
On the data front, US ADP National Employment Change figures came a whisker lower than foreseen in November, but October was downwardly revised.
Ahead this week, the US docket will feature Fed speakers, Initial Jobless Claims and Nonfarm Payrolls (NFP) figures.
Oil futures dropped nearly 2% on Wednesday as markets braced for an OPEC+ decision on production cuts, while a larger-than-expected draw in U.S. crude stockpiles provided modest support to prices.
Investors are closely watching the upcoming OPEC+ meeting later today, where the group is expected to extend current production cuts through the end of the first quarter of 2024, according to industry sources.
The Energy Information Administration (EIA) reported that U.S. crude stockpiles fell more than anticipated last week as refiners ramped up operations. However, gasoline and distillate inventories rose by more than expected.
The US 500 and US Tech 100 closed at all-time highs for the third straight session on Wednesday, powered by strong gains in technology stocks. Federal Reserve Chairman Jerome Powell signaled a cautious approach to interest rate cuts but did not suggest that a December cut was off the table, which helped sustain bullish market momentum.
Salesforce surged 11% after beating third-quarter revenue expectations and raising its annual revenue forecast. The company credited robust enterprise cloud spending and rising demand for its AI-driven offerings.
Looking ahead, investors are focusing on the U.S. nonfarm payrolls report for November, scheduled for release on Friday, as a key indicator for the Fed’s monetary policy direction.
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