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10/10/2024 - 07:25 UTCThe dollar gained sharply against most of its major peers on Wednesday, with the dollar index (USDX) adding another 0.45% to its value and hitting 10-week highs versus the yen while the euro fell to its lowest since Aug. 13. Investors seem increasingly assured that the Federal Reserve will adopt less aggressive monetary stimulus, given the recent meeting minutes, which underscored the central bank's priority of maintaining a robust labor market.
The primary focus of attention is now on the forthcoming release of key inflation data (CPI), which is anticipated to indicate that core U.S. inflation held steady at an annual rate of 3.2%, according to a consensus forecast from Reuters. In addition, Fed officials stated that they were less concerned now about resurgent inflation and more focused on the labor market.
The market is currently expecting a 25-basis point rate cut by the Federal Reserve in November, with an 81.2% probability according to the CME's FedWatch tool. The probability of interest rates remaining unchanged stands at 18.8%.
Market sentiment on Wall Street experienced a positive reversal on Wednesday, with major U.S. indices exhibiting significant gains as investors continue to analyze indications regarding interest rate policy from the Federal Reserve, in anticipation of the forthcoming release of inflation data later in the day.
In corporate developments, Alphabet's stock declined by 2% following news of the U.S. Department of Justice's consideration of potential sanctions against its parent company, Google, subsequent to a landmark antitrust case that determined the group's culpability in abusing its dominant market position. Meanwhile, Tesla Inc. registered a 1% decrease in its stock price as the electric vehicle manufacturer prepared to commence its highly anticipated robotaxi event on Wednesday.
On the energy front, the two primary oil benchmarks, WTI and Brent, experienced a significant decline on Wednesday, primarily attributed to a larger-than-anticipated increase in U.S. crude inventories. These developments overshadowed concerns regarding supply disruptions arising from the ongoing conflict in the Middle East.
Investors are bracing for market swings upon the release of U.S. Jobless Claims and CPI data, as a strong labor market is making it harder to bring inflation down to 2%. Earnings from Tilray and Delta Airlines will also be in focus.
The EUR/USD pair ended the session on Wednesday with sharp losses remaining under the level of 1.0950.
The US Dollar (USD) continues to hold firm near its highest level since mid-August, as markets have largely ruled out the likelihood of a 50 basis points (bps) rate cut by the Federal Reserve (Fed) in November.
Meanwhile, the Euro remains under pressure due to rising expectations that the European Central Bank (ECB) will implement a 25 bps rate cut at each of its final two meetings of the year.
The US Consumer Price Index (CPI), a critical inflation gauge, is set to be released later today, followed by the Producer Price Index (PPI) on Friday.
Gold extended its losing streak to six consecutive sessions following the release of the Federal Reserve's (Fed) September meeting minutes. The minutes revealed that a "substantial majority" of Federal Open Market Committee (FOMC) members supported a 50-basis-point (bps) rate cut.
The FOMC minutes also indicated that while some officials preferred a more modest 25 bps cut, all members were in favor of reducing interest rates. On the Fed’s dual mandate, most participants saw downside risks to inflation but upside risks to the labor market.
Attention now turns to today's US Consumer Price Index (CPI) release, where forecasts indicate further easing in inflation.
Oil prices settled lower on Wednesday as a larger-than-expected increase in U.S. crude inventories outweighed concerns over supply disruptions due to the conflict in the Middle East and the impending landfall of Hurricane Milton in the U.S.
According to the Energy Information Administration (EIA), U.S. crude oil inventories surged by 5.8 million barrels last week, significantly surpassing expectations of a 2.0 million barrel build.
Traders closely monitored potential supply disruptions from Hurricane Milton, one of the most powerful hurricanes in recent history.
U.S. main indexes closed higher on Wednesday as investors continued to weigh signals on interest rates from the Federal Reserve, while awaiting key inflation data and Tesla's highly anticipated robotaxi event.
The minutes from the Federal Reserve's September 17-18 meeting, released Wednesday, revealed that a "substantial majority" of Fed officials supported a larger rate cut. However, some members favored a more modest reduction due to concerns over the economy's strength.
Investors will look to Thursday’s consumer price index (CPI) release for more clues on the future direction of monetary policy. Concerns are growing that the final push to bring inflation down to the 2% target could prove more challenging than initially anticipated, given the recent strength in the labor market.
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