The dollar gained against most major currencies on Friday, with the dollar index (USDX) trading near two-month highs as strong data reported by the US employment sector and recent comments from Feds president lower expectations for an early rate cut. Fed Chair Jerome Powell spoke on CBS 60 Minutes on Sunday, stating that resilience in the U.S. economy gave the Fed more headroom to keep monetary policy steady for the time being. He also pointed out that any potential rate cuts will be data driven.
According to the CME Fedwatch tool, the markets price in a 13.5% possibility that the 1st rate cut in 2024 will take place in the March FOMC meeting, while the same possibility for a rate hike taking place in May is at 55.2%.
Another week ended in positive territory with all three main stock indices hitting new all-time highs following a robust jobs report and solid earnings reports from tech giants Microsoft Corporation and Meta Platforms Inc. The positive momentum overshadowed Federal Reserve Chair Jerome Powell's comments last Wednesday where he downplayed the scenario for early rate cuts.
Fourth quarter earnings are now in focus, with some major market players publishing their quarterly results later today, among which are McDonald's Caterpillar, Palantir Technologies, and Chegg. Other key earnings reports are due later this week by Spotify, Snapchat, Disney, Paypal, Wynn Resorts, Expedia and Pepsi co.
On the energy front, the two main benchmarks WTI and Brent posted another sharp decline on Friday, ending the week lower by more than 7.5%. Part of the move is attributed to a stronger dollar as well as easing concerns over possible supply disruptions, as optimism looms over an extended ceasefire in the Israel-Hamas war.
Some price action could be observed later in the day upon the release of the Sentix Investor Confidence, the ISM Services PMI and a speech by Fed Chair Powell.