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11/07/2024 - 08:18 UTCThe U.S. dollar had a small correction in value on Wednesday, with the dollar index (USDX) widening its trading range between levels 104.49 and 104.91. Part of the pressure on the dollar was attributed to the second testimony by Fed Chair Jerome Powell, where he commented that the Fed did not need to see inflation falling below its 2% target to begin cutting rates, only that the bank needed enough confidence that inflation was easing. This statement adds significant weight on upcoming CPI data, as any signs of easing inflation could have significant influence on the markets.
Traders are maintaining bets on a September cut as seen in the CME FedWatch tool, with the likelihood currently at 70%. Expectations for a rate cut in November also remain significant at 50.2%.
In other news, gold prices gained on Wednesday, extending its recent gains amid central banks in emerging markets accumulating the precious metal and signals from the Fed suggesting a softer approach to interest rates.
In the cryptos space, Bitcoin and Ethereum remain pinned down to monthly lows, with the first consolidating close to the $57K mark after it was beaten down with losses of more than 10% in the last month. Pressure derives from heavy selling pressures from miners, the German government and the initiation of repayment by Mt.Gox to its creditors in relation to the 2014 exchange incident that resulted in the loss of 850,000 Bitcoins. The overall crypto market capitalization currently stands at 2.25 trillion dollars
Encouraged by the overnight rally on Wall Street, regional stocks followed with gains. US 500 and US Tech 100 reached unprecedented levels on the back of comments from Fed Chair Jerome Powell, which instilled optimism about a soft economic landing and the possibility of lower interest rates in the coming year.
The Fed's stance has brought the upcoming consumer price index inflation data into sharp focus, as it will likely have a significant impact on their future interest rate policy.
EUR/USD experienced upward movement on Wednesday, driven by widespread selling of the Greenback across the market.
Investor confidence has significantly rebounded and shifted towards renewed anticipation of interest rate cuts following Federal Reserve (Fed) Chairman Jerome Powell's recent dovish remarks during his two-day testimony to US Congressional committees.
Powell cautiously acknowledged recent progress on inflation, prompting a recovery in risk appetite as investors once again hope for a rate cut in September.
Investors will be watching for lower-than-expected US CPI inflation later today. Furthermore, German final HICP inflation numbers are due during Thursday’s European market session.
On Wednesday, gold prices saw an increase, supported by the decline in the dollar and Treasury yields. This surge came amidst growing speculation regarding potential U.S. interest rate cuts, ahead of the release of important inflation data. Furthermore, the upward momentum of the precious metal was bolstered by dovish-leaning remarks made by Federal Reserve Chair Jerome Powell.
Powell’s comments saw traders largely maintain their bets on a September rate cut. The CME Fedwatch tool showed traders pricing in a 72.5% chance for a 25 basis point cut in September.
Powell's statements negatively impacted the dollar, shifting attention towards the imminent release of the consumer price index data later on Thursday. It is widely anticipated that the data will indicate a slight decrease in inflation.
On Wednesday, oil prices saw an increase following the release of data indicating a greater-than-anticipated reduction in U.S. inventories, pointing to constrained conditions in the world's leading consumer market.
The Energy Information Administration published data showing an unexpected 3.4 million barrel decrease in U.S. oil inventories for the week ending July 5, as opposed to the projected 700,000 barrel increase.
Despite these gains, oil prices were curbed by speculations about a potential truce between Israel and Gaza, with Hamas reportedly making concessions in a bid to reach a deal with Israel.
The major U.S. stock indices made gains on Wednesday, primarily driven by the technology sector and continued optimism about a potential earlier rate hike as Federal Reserve Chair Jerome Powell gave his testimony to Congress for the second consecutive day. This comes just ahead of the release of new inflation data.
Tech stocks played a significant role in bolstering the overall market's ongoing record surge, with Nvidia and Apple Inc. contributing to this momentum. Apple's stock rose by 1%, reflecting renewed investor confidence in its iPhone sales.
Federal Reserve Chair Jerome Powell expressed his confidence in a soft landing for the U.S. economy despite the central bank's persistence in implementing tight monetary policy measures to combat inflation. Powell's remarks have placed considerable attention on the forthcoming consumer price index inflation data, which is scheduled for release later today.
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