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11/10/2024 - 07:59 UTCThe dollar traded between gains and losses on Thursday, ultimately closing lower for the day. The dollar index (USDX) formed a trading range between 102.48 and 102.98, where any breakout above or below could be closely watched. Market participants are grappling with mixed economic data, including softer labor market indicators and a modest increase in consumer prices. The Federal Reserve's recent emphasis on employment has fueled expectations for more aggressive interest rate cuts.
The primary focus of attention for today is on the forthcoming release of key inflation data (PPI) as well as some key speeches from members of the Fed such as Logan, Bowman and Goolsbee for further indications on the central bank’s path forward.
The market is currently expecting a 25-basis point rate cut by the Federal Reserve in November, with an 84.3% probability according to the CME's FedWatch tool. The probability of interest rates remaining unchanged stands at 15.7%.
Wall Street sentiment remained cautiously optimistic on Thursday, with major U.S. indices hovering near all-time highs. Investors closely watch for clues on interest rate policy from the Federal Reserve ahead of the day's inflation report. On the corporate front, several major banks, including JPMorgan Chase, Wells Fargo, and Bank of New York Mellon, are scheduled to report third-quarter earnings on Friday. Goldman Sachs, Bank of America, and Citigroup are set to follow next week. Delta Air Lines stock dipped after its current-quarter earnings outlook fell short of analyst estimates, impacted by a summer computer outage and competitive pricing pressures.
On the geopolitical front, Israel’s security cabinet met Thursday night to vote on the country’s response to Iran’s Oct. 1 missile attack, while the the Gulf states are urging the US to stop Israel from bombing Iran's oil sites. In recent communications, Biden has warned Israel against attacking Iran’s nuclear sites, which Tehran would view as especially provocative. US officials also worry that hits on Iranian oil infrastructure would push up energy prices and hurt the global economy.
Investors are bracing for market swings upon the release of US Core PPI data and Prelim UoM Consumer Sentiment and Inflation Expectations. Canada’s unemployment rate could also be closely watched.
The EUR/USD pair managed to hold just above the 1.0900 level, despite closing lower in Thursday’s session.
In the U.S., headline CPI inflation for the year ending in September declined less than expected, easing from 2.5% to 2.4%. However, core CPI inflation edged higher, rising to 3.3% YoY in September from the previous 3.2%.
Meanwhile, U.S. Initial Jobless Claims for the week ending October 4 rose unexpectedly to 258,000, marking the highest level of new claims since June 2023.
The rise in unemployment claims fueled hopes of potential rate cuts as the Federal Reserve continues to navigate a fragile labor market. However, persistent inflation complicates the path forward, tempering expectations of a swift reduction in interest rates.
Gold prices regained some momentum on Thursday after a stronger-than-expected U.S. inflation report was tempered by weaker labor market data. However, recent hawkish remarks from a Federal Reserve (Fed) official limited further gains for the precious metal.
U.S. inflation for August came in slightly above expectations, but this was counterbalanced by soft employment data. The U.S. Department of Labor reported a higher-than-anticipated number of initial jobless claims, which could prompt the Fed to consider more aggressive rate cuts.
Looking ahead, bullion traders will closely watch Friday's release of the U.S. Producer Price Index (PPI) and the University of Michigan’s Consumer Sentiment Index for further economic insights.
Oil prices surged by more than 3% on Thursday, driven by a spike in U.S. fuel demand ahead of Hurricane Milton, heightened geopolitical risks in the Middle East, and optimism surrounding potential energy demand growth in both the U.S. and China.
In the U.S., the world's largest oil producer and consumer, Hurricane Milton swept across Florida, where around a quarter of fuel stations reported gasoline shortages, and power outages affected over 3.4 million homes and businesses.
In a move that could support oil demand in China, the world’s second-largest oil consumer, the Chinese government introduced a draft law aimed at promoting private sector development, signaling efforts to boost investor confidence amid an economic slowdown.
U.S. main indexes closed down on Thursday as stronger-than-expected inflation data raised doubts about the pace of potential Federal Reserve rate cuts.
Headline U.S. inflation slowed on a year-over-year basis in September but remained higher than expected, dampening hopes for swift rate cuts by the Federal Reserve.
Attention is shifting to third-quarter earnings reports, with major banks slated to release their results on Friday. JPMorgan Chase, Wells Fargo, and Bank of New York Mellon will lead the way, while Goldman Sachs , Bank of America, and Citigroup are set to report next week.
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