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03/10/2024 - 07:35 UTCThe dollar gained ground versus most of its major peers on Wednesday, hitting three-week highs against the euro, with the dollar index (USDX) up by 0.45%, buoyed by positive US jobs data and receding bets on a significant rate cut by the Fed. Rising geopolitical tensions further strengthened the dollar's position as a safe-haven currency.
Private payrolls increased by 143,000 jobs last month after rising by an upwardly revised 103,000 in August, the ADP National Employment Report showed on Wednesday. Economists polled by Reuters had forecast 120,000 job additions. The focus now turns to growing geopolitical tensions in the Middle East, a day after Iran's surprise attack on Israel, as fears of a wider conflict loomed
Later this week, investors will be closely watching the release of the September government nonfarm payrolls report in an attempt to gauge the pace of future rate cuts by the Fed. Economists surveyed by Reuters predict that employers added 140,000 jobs during the month while the unemployment rate remained unchanged at 4.2%.
The market is currently expecting a 50-basis point rate cut by the Federal Reserve in November, with a 33.6% probability according to the CME's FedWatch tool. However, a smaller 25-basis point cut is considered as more likely, with odds standing at 66.4%.
Major U.S. indexes a posted a moderate recovery on Wednesday, despite an overall shift away from risky assets, with investors waiting to see how Israel will respond to Tehran's airstrikes.
In corporate news, Nike shares plunged over 6% after it abandoned its annual revenue forecast and reported a double-digit decline in quarterly sales. The sportswear giant is also undergoing a leadership change, with John Donahoe stepping down as CEO and being replaced by veteran executive Elliott Hill. Donahoe's tenure was marked by sluggish growth amid fierce competition in the global sneaker market. Tesla shares took a hit, falling over 3%, as the electric vehicle maker's Q3 deliveries missed expectations. Despite offering incentives and affordable financing, demand for Tesla's older models has weakened in an increasingly competitive market.
Investors are bracing for market swings as a wave of economic data is set to be released later today. This includes the Final Services PMIs from the eurozone, the UK, and the US, US jobless claims, the ISM services PMI, and US factory orders.
The EUR/USD pair continued its slide on Wednesday, with bearish pressure intensifying as markets face heightened uncertainty in the Middle East and diminishing expectations for a significant rate cut from the Federal Reserve (Fed) in November.
This week’s economic calendar is dominated by U.S. data, while European events are limited to lower-tier comments from European Central Bank (ECB) policymakers. The key focus remains on Friday’s U.S. Nonfarm Payrolls (NFP) report, with investors bracing for a potentially market-moving update on net job growth.
U.S. ADP Employment Change data for September exceeded expectations, reporting 143,000 new jobs—well above the forecast of 120,000 and August’s revised figure of 103,000.
Gold prices remained unchanged on Wednesday as traders monitored Israel’s response to Iran’s missile attack.
Israel’s representative to the United Nations warned that Iran would face consequences for Tuesday's attack, while U.S. Deputy Secretary of State Kurt Campbell confirmed that the U.S. is also considering its response options alongside Israel.
Gold benefited from the Fed’s decision to reduce rates at its September meeting. However, rising U.S. Treasury yields and a stronger U.S. dollar are acting as headwinds for the precious metal. Looking ahead, investors are focused on further U.S. labor market data.
Oil prices ticked up on Wednesday amid concerns that the escalating conflict in the Middle East could disrupt oil supplies from one of the world’s most crucial producing regions. However, a significant rise in U.S. crude inventories limited the extent of these gains.
Experts fear that an attack on Iran’s oil infrastructure could prompt Tehran to retaliate with strikes on Saudi oil facilities, similar to the 2019 attacks that crippled Saudi oil production. Ta
Meanwhile, in the U.S., crude inventories surged by 3.9 million barrels to 417 million barrels for the week ending September 27, far exceeding analysts’ expectations of a 1.3 million-barrel draw.
U.S. main indexes rose on Wednesday buoyed by stronger-than-expected jobs data, though gains were capped by escalating tensions in the Middle East.
The Federal Reserve is closely monitoring labor market trends, with any unexpected weakness potentially prompting further action. Richmond Fed President Thomas Barkin noted on Wednesday that the Fed’s median policy outlook projects 50 basis points of rate cuts by the end of 2024.
In corporate news, Nike shares fell over 6% after the sportswear giant withdrew its full-year financial forecast and reported a 10% drop in quarterly revenue. Tesla shares dipped more than 3% after the electric vehicle maker missed third-quarter delivery estimates. Despite offering incentives and low-cost financing, Tesla struggled to boost demand for its aging models in a fiercely competitive market.
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