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19/07/2024 - 07:50 UTCThe U.S. dollar gained against most major currencies on Thursday recovering most of Wednesday’s losses, with the dollar index (USDX) extending its rally early on Friday to break above the 104.0 mark rebounding from lows last seen in March. Reports suggest the move was partly driven by recent US-China tensions, which have boosted the dollar's appeal as a safe haven.
Nonetheless, markets maintain bets that the Federal Reserve will begin cutting interest rates from September with the CME FedWatch indicating expectations for a September rate cut remain elevated at 95.3% while bets for a second rate cut to occur in November rose from 56.4% to 59.2%.
The main US stock indices posted sharp losses on Thursday, with the US 30 losing 1.37% of its value, the US 500 down by 0.85% and the US tech 100 posting a 0.57% decline, pressured by a transition of investor funds out of technology companies and into other sectors due to geopolitical concerns that dragged Nvidia to a selloff and uncertainty over U.S. politics amid growing calls for President Joe Biden to withdraw his reelection bid. The recent 6% decline in Nvidia's stock price has heightened market volatility as investors grapple with concerns over potential tightening of U.S. export controls on chipmaking equipment to China.
Market focus now, lies squarely on key upcoming earnings reports from the technology sector, scheduled for next week. Microsoft, Alphabet Inc., and Tesla Inc. will release financial results on Tuesday. Particular attention will be paid to the tech giants' commentary on artificial intelligence following the rapid appreciation of their market capitalizations.
In the spotlight for Friday are PPI numbers from Germany, retail sales from Canada and the UK and speeches from Fed members Bostic and Williams. Williams will participate in a panel discussion titled "A New Era for Monetary Policy" at the 15th Bretton Woods Conference, in Peru and Bostic will deliver closing remarks at a conference hosted by the Federal Reserve Bank of Dallas.
EUR/USD experienced a decline on Thursday, retreating to the 1.0900 level amidst a broad market recovery in the US dollar. The increase in weekly US jobless claims further strengthened expectations for a September rate cut by the Federal Reserve (Fed). Meanwhile, the European Central Bank (ECB) chose to maintain interest rates due to uneven economic data.
With the ECB's decision to hold rates in July, focus will now shift to next week’s pan-EU Harmonized Index of Consumer Prices (HICP) inflation data.
On Thursday, US Initial Jobless Claims surpassed expectations, with 243K new claims for the week ending July 12, compared to an anticipated 230K. This increase exceeded the previous week’s revised 223K. The softening labor data is expected to reinforce market expectations for a September rate cut by the Fed. Notably, markets are already pricing in nearly a 100% probability of a quarter-point rate cut from the Federal Open Market Committee (FOMC) on September 18, leaving little room for further adjustments.
Gold prices experienced a slight decline on Thursday, remaining near the all-time high achieved in the previous session. This occurred as the anticipation of a potential interest rate cut from the U.S. Federal Reserve in September continued to gain traction.
Meanwhile, the European Central Bank adhered to expectations by maintaining unchanged interest rates, as confirmed by its president, Christine Lagarde, who expressed that the possibility of a move in September was "wide open."
On Thursday, oil prices closed lower despite indications of softness in the labor market, which raised hopes for rate cuts following a larger-than-expected drop in U.S. inventories the previous day.
The data revealed a third consecutive weekly decline in U.S. inventories, suggesting increased demand in the world's largest fuel importer as the travel-heavy summer season approached.
Nevertheless, crude markets have endured significant losses in the past week, spurred by a series of lackluster economic reports from top importer China, fueling concerns about a slowdown in global demand.
U.S. stocks experienced a significant decline on Thursday, with early gains reversed as investors shifted away from high-priced megacap growth stocks amidst the ongoing second-quarter earnings season. All three major U.S. stock indexes faced losses.
The sell-off followed the US Tech 100 registering its most substantial single-day drop since December 2022, and the chip sector facing its most significant daily percentage plunge since the March 2020 pandemic-related shutdown panic.
Warner Bros Discovery saw a 2.4% increase following reports of discussions regarding a potential split of its digital streaming and studio businesses from its legacy TV networks. Additionally, streaming pioneer Netflix experienced a decline in extended trading after releasing its quarterly results.
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