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11/12/2024 - 06:00 UTCThe U.S. dollar showed some resilience against most major currencies in recent sessions, with the dollar index up for a third session in a row, gaining 0.24%. Market attention is now focused on CPI inflation data due later in the day, as it could provide some insight on how the Federal Reserve will move forward with monetary policy.
Market expectations for a 25 basis point rate cut at the upcoming FOMC meeting, currently stand at 86.1%, as indicated by the CME FedWatch Tool. Odds for rates to remain unchanged stand at 13.9%.
Asian stock markets displayed mixed performance on Wednesday with the Japan 225 down by a mere 0.06% while the China A50 and the Hong Kong 50 were down by around 4% as investors adopted a cautious approach ahead of the release of a crucial U.S. inflation report. In previous sessions, Chinese stocks experienced gains as investors anticipated further government announcements regarding stimulus measures. However, geopolitical tensions in the Middle East, following the ousting of Syria's government by rebel forces, led to a more risk-averse sentiment among investors.
The main US stock indices closed lower once again on Tuesday, pressured by a persistent decline in technology stocks, which contributed to a cautious market mood. Investors were also wary of the upcoming release of the inflation report on Wednesday and the Federal Reserve's meeting next week, as these events could have significant implications for the market. Furthermore, the escalation of geopolitical tensions in the Middle East, following the ousting of Syria's government by rebel forces, further eroded risk appetite.
Crypto markets were seen moving lower once again on Tuesday, hit by a wave of profit-taking on Tuesday, with Bitcoin down by another 0.9% and Ethereum losing 2.24% of its value by the end of the session.
For Wednesday, markets will most likely be focusing on US monthly inflation numbers along with a monetary policy statement from the BOC. Some price action could also be observed upon the release of the US Federal Budget Balance, a 10-y bond auction and the EIA crude oil inventories.
The EUR/USD pair edged lower once again on Tuesday, ending the session down by 0.22% pressured by strength in the dollar seen recently amid rising geopolitical concerns.
Further pressure on the euro came from expectations for a potential rate cut in the upcoming ECB meeting due on Thursday.
Investors are focused on Wednesday's CPI report, which will provide insights into inflation and potential interest rate moves. Headline CPI is expected to rise to 2.7% year-over-year, while core CPI is forecast to remain at 3.3%.
Gold prices gained by more than 2% in the last two sessions, supported by safe-haven demand amid escalating geopolitical tensions in the Middle East following the collapse of the Bashar al-Assad regime in Syria.
Gold prices have received a boost from geopolitical tensions and renewed interest from China. The People's Bank of China (PBoC) resumed gold purchases in November after six-months, signaling increased demand for the precious metal. This development, coupled with geopolitical concerns, has strengthened gold's appeal as a safe-haven asset.
On the energy front, the two main benchmarks WTI and Brent, gained by 0.48% and 0.24% respectively, adding to this week’s gains as market participants are expecting a rise in demand for crude oil from China, the world's largest importer of the commodity. This expectation is fueled by Beijing's recent announcement of a looser monetary policy, which is designed to stimulate economic growth and, consequently, boost energy consumption.
Developments in Syria have also added a geopolitical risk premium to oil prices. Rebel forces have reportedly taken control of Damascus after years of civil conflict, with President Bashar al-Assad fleeing to Russia.
Official data on oil stocks from the U.S. Energy Information Administration is due on Wednesday and analysts polled by Reuters expect a 900,000-barrel decline in crude and a 1.7 million-barrel increase in gasoline.
Wall Street indexes ended in negative territory on Tuesday, primarily due to a sustained decline in technology stocks. Oracle Corporation's weaker-than-expected earnings report significantly impacted its stock price, which fell nearly 7% during the session. In contrast, Alphabet Inc. emerged as a standout performer, with its shares rising 5.6% after announcing a groundbreaking advancement in quantum computing.
However, broader technology stocks experienced a pullback as investors took profits following a recent rally. This overall weakness in the tech sector pressured Wall Street indexes, keeping them subdued ahead of the release of crucial inflation data on Wednesday.
Investors are not turning their attention to the forthcoming release of the Consumer Price Index (CPI) report on Wednesday. This critical economic indicator could offer valuable insights into inflationary trends and the potential path of monetary policy.
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