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30/08/2024 - 07:45 UTCThe dollar index (USDX) gained for another day against most of its major peers, with the dollar index adding another 0.33% to end Wednesday’s session at 101.33. Gross domestic product data released on Thursday showed the U.S. economy grew more than initially estimated in the second quarter while other data showed a slightly bigger than expected dip in jobless claims. The anticipated release of the U.S. Personal Consumption Expenditure (PCE) price index later today is expected to play a significant role in shaping expectations regarding potential interest rate reductions by the Federal Reserve.
The CME's FedWatch tool suggests a 67% chance of a 0.25% rate cut in September, while a 0.5% cut is seen as less likely at 33%. November odds for another cut stand above 42.6%.
U.S. stock index futures climbed Thursday evening as a tech sell-off moderated following Nvidia's earnings report, which indicated sustained AI demand. Anticipation of interest rate cuts and upcoming PCE price index data, the Fed's favored inflation metric, further buoyed Wall Street near record levels. The US 500 gained 0.76%, the US tech 100 rose 1.23%, and the US 30 jumped 0.62%, temporarily touching record highs.
Early on Friday, Asian markets took some positive cues from Wall Street as technology stocks recovered from Nvidia-induced losses, while month-end bargain buying saw Chinese shares rebound from more-than six-month lows.
In the energy sector, both WTI and Brent crude oil gained by1.62% and 0.39% respectively on Thursday, underpinned by ongoing supply risks as crude output in Libya slumped, while Iraq detailed plans to reduce output starting next month.
Market participants are focused on a packed economic calendar for Friday, which includes several critical data releases that could significantly influence price movements. These key indicators include the Eurozone CPI, U.S. consumer sentiment and inflation expectations, U.S. personal income and personal spending, Core PCE price index data, and GDP data from Canada.
The EUR/USD pair experienced a significant sell-off on Thursday ending the session 0.40% lower.
One of the main drivers behind the US Dollar's strength is the upward revision of the Q2 Gross Domestic Product (GDP) figures, which have sparked a sharp recovery in the currency.
The updated US Q2 GDP report revealed that the economy grew at an annualized rate of 3%, outperforming the initial estimate of 2.8%.
In addition to the robust GDP data, preliminary inflation reports from Spain and Germany indicated that price pressures eased further in August.
Investors will closely monitor the upcoming US Personal Consumption Expenditure (PCE) Price Index data for July.
Gold prices climbed around 1% on Thursday, driven by strong expectations of a Federal Reserve interest rate cut in September.
Geopolitical tensions continue to influence gold as a safe-haven asset. Economic data released earlier showed that U.S. initial jobless claims fell last week, although the Labor Department indicated that the unemployment rate likely remained elevated in August.
Oil prices rose significantly on Thursday, driven by supply disruptions in Libya and plans for production cuts in Iraq, fueling concerns about tighter global supplies.
Libya’s oil production faced significant disruptions, with more than half of its output offline on Thursday. Meanwhile, Iraq announced plans to reduce its oil output in September as part of efforts to compensate for exceeding the production quota agreed upon with the Organization of the Petroleum Exporting Countries (OPEC) and its allies.
Adding to the upward pressure on oil prices, expectations for an interest rate cut by the U.S. Federal Reserve next month have also provided support.
U.S. stock index futures ended the session positive on Thursday, as the sell-off in technology stocks eased following strong earnings from Nvidia Corp, which highlighted continued demand driven by artificial intelligence.
Optimism around potential interest rate cuts kept Wall Street near record highs, with attention now turning to the upcoming Personal Consumption Expenditures (PCE) price index data—the Federal Reserve’s preferred inflation measure due later in the day.
Recent data showed the U.S. economy grew more than initially estimated in the second quarter, and jobless claims dipped slightly more than expected. These signs of economic resilience suggest that the Fed may have less urgency to implement sharp rate cuts, yet also support the view that the economy could achieve a soft landing, encouraging investment in more economically sensitive sectors.
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