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25/07/2024 - 07:58 UTCThe dollar slipped against most major currencies on Wednesday, continuing a downward trend from the previous session, with the dollar index (USDX) down by 0.08%. Growing expectations of a Federal Reserve interest rate cut in September are exerting downward pressure on the greenback as investors await crucial GDP data later today and key inflation numbers due tomorrow that could signal the beginning of the Fed easing cycle.
Market expectations for a Federal Reserve interest rate reduction in September fell sharply from 93.6% seen yesterday to 83.9% according to CME FedWatch. Expectations for a subsequent rate cut in November have risen, from 55.1% to 56.9%.
In other news, the top two cryptocurrencies by market cap, Bitcoin and Ethereum fell by 0.88% and 4.25% respectively on Wednesday, due to risk-averse sentiment stemming from the US stock exchange's downturn. Speculation surrounding the presidential election added further pressure on cryptocurrency prices.
Wall Street sentiment soured on Wednesday as the US 500, that tracks the performance of the S&P 500 future, closed sharply lower, suffering its biggest one day lost since 2022. The move stems from underwhelming second-quarter earnings from heavyweights Alphabet and Tesla that ignited a prolonged sell-off in the rest of the technology stocks, already reeling from heavy losses in recent weeks. In addition, profit-taking by investors and a recent preference for cyclical industries have added further pressure on the tech sector's decline. Tesla stock tumbled more than 12% after its second-quarter earnings missed estimates amid falling vehicle sales and Google-parent Alphabet fell nearly 5%.
In the spotlight for Thursday is the U.S. advanced GDP report, weekly jobless claims, durable goods orders and later on, a meeting of the G20 will take place to discuss global economic issues.
The EUR/USD pair closed Wednesday's session with modest losses for the second consecutive day, driven by a pessimistic outlook on the Eurozone's economic prospects and mounting expectations of further rate cuts by the European Central Bank (ECB) in September.
Earlier this week, ECB vice president Luis de Guindos alluded to a potential interest rate reduction in September, citing the central bank's need for additional data to evaluate the monetary policy scenario. Meanwhile, market participants across the Atlantic anticipate that the US Federal Reserve (Fed) will commence interest rate cuts in September.
In the US, private sector business activity continued to expand in July. The S&P Global Manufacturing PMI fell to 49.5 in July from 51.6 previously, while the Services PMI climbed to 56.0 in July from 55.3 in June, surpassing the consensus of 54.4.
Later today, investors will keenly observe the address by the ECB’s Lagarde, as well as the release of the advanced US Gross Domestic Product (GDP) for the second quarter (Q2).
Gold prices experienced a decline on Wednesday as investor attention turned towards upcoming U.S. economic data, which is expected to provide further insight into the timing of potential interest rate cuts by the central bank. Investors are eagerly anticipating the release of the U.S. gross domestic product report for the second quarter on Thursday, as well as the personal consumption expenditures data for June on Friday, in hopes of gaining valuable clues regarding the Federal Reserve's interest rate cut trajectory.
Oil prices closed higher on Wednesday, supported by significant drops in U.S. crude and fuel inventories, yet remained near their lowest point in six weeks due to worries about sluggish global demand.
The increase halted three consecutive sessions of declines driven by the decrease in U.S. crude and fuel stocks, as well as escalating oil supply risks stemming from Canadian wildfires.
According to the Energy Information Administration, U.S. crude inventories declined by 3.7 million barrels last week, surpassing analysts' expectations in a Reuters poll for a draw of 1.6 million barrels.
Nonetheless, prices continue to face pressure from the ceasefire negotiations between Israel and Hamas, as well as lingering concerns regarding the economic deceleration in China, the world's largest crude importer, which may dampen global oil demand.
The US 500 and US Tech 100 concluded the day at their lowest points in several weeks this past Wednesday, as lackluster earnings from Alphabet and Tesla affected investor confidence in large-cap companies.
Tesla had a significant impact with a 12.43% decline, marking its steepest one-day drop since September 2020. This occurred following the electric vehicle manufacturer's report of its lowest profit margin in over five years and failure to meet second-quarter earnings expectations.
Google's parent company, Alphabet, also experienced a 5% decrease, marking its lowest close since May 31, despite surpassing second-quarter earnings projections. Investors honed in on the deceleration in advertising growth and the company's announcement of substantial capital expenses for the year.
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