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29/10/2024 - 09:08 UTCThe dollar posted a moderate increase on Friday, with the dollar index up by 0.30% ending a fourth straight week of gains, bolstered by economic data that reduces expectations for aggressive Fed easing. The move came following news from the Commerce Department showing that non-defense capital goods orders, excluding aircraft, rose more than expected in September along with improved consumer sentiment revealed by the University of Michigan survey.
The dollar appears to react positively to market expectations for a victory next month by Republican candidate and former U.S. President Donald Trump, which would likely bring about inflationary policies such as tariffs.
Based on the CME Fedwatch tool, markets are currently pricing in a strong likelihood of a 25-basis-point interest rate reduction by the Federal Reserve. The probability of such a cut stand at 94.9%, while the odds of rates remaining unchanged are negligible at 5.1%.
The Germany 40 ended the week 1.25% lower, as market participants digested quarterly financial results from several prominent firms. Corporate earnings season continues Tuesday, with investors digesting results from major companies. HSBC shares rose 2.2% after a strong Q3 report, while Adidas stock gained 1.3% on strong China growth, and BP fell 0.9% due to weaker refining and trading.
In the US, investor positioning in technology stocks has intensified in anticipation of a series of crucial earnings reports from leading technology companies this week. Alphabet Inc. is scheduled to report earnings on Tuesday, followed by Meta Platforms, Inc. and Microsoft Corporation on Wednesday. Apple Inc. and Amazon.com, Inc. are set to release their earnings reports on Thursday.
Market participants may see some price action later today as several key economic indicators are released. These include the S&P/CS Composite-20 HPI, the CB Consumer Confidence from the US and JOLTS Job Openings. Later this week Core PCE Price Index, U.S. Advance GDP and US Non-Farm Payrolls will be watched closely.
On Monday, the EUR/USD pair saw a partial recovery from its recent multi-week losses after hitting lows near 1.0760 last week.
Looking ahead, markets are largely pricing in a 25-basis-point rate cut by the Fed in November, according to the CME Group’s FedWatch Tool. However, some Fed officials, including FOMC Governor Michelle Bowman and Atlanta Fed President Raphael Bostic, have expressed reservations about the timing of this cut, with Bostic suggesting the possibility of a delay.
Across the Atlantic, the ECB has signaled a cautious approach to future rate decisions, with ECB President Christine Lagarde underscoring the importance of data-driven choices in an evolving economic landscape.
With both the Fed and ECB weighing their next moves, EUR/USD’s future direction will likely hinge on broader economic trends.
Gold maintained a steady upward trajectory on Monday, trading near $2,750 and within reach of last week’s record highs. Ongoing geopolitical tensions and rising political uncertainty in the US continue to bolster demand for the safe-haven asset. Additionally, a softer tone in US Treasury yields and cautious sentiment in broader markets provide further support to gold.
Meanwhile, expectations for a more gradual approach to rate cuts by the Federal Reserve (Fed) are likely to support US bond yields, helping the US Dollar (USD) recover from its pullback after reaching a three-month high. This relative stability in the USD is tempering fresh bullish bets on the non-yielding asset.
Oil prices fell sharply on Monday after the weekend’s Israeli strike against Iran avoided targeting oil production and nuclear facilities, reducing the risk of a major disruption to energy supplies.
This restrained action by Israel eased market concerns over a major escalation in Middle Eastern tensions that could have disrupted oil supplies from this energy-rich region. Despite the avoidance of key sites in Iran, the broader regional conflict remains ongoing, with Israel continuing operations against Hamas and Hezbollah.
Beyond Middle Eastern developments, markets are watching a series of key economic indicators this week for insight into global oil demand trends.
On Monday, U.S. indexes posted modest gains, remaining near record highs as traders brace for potential volatility ahead of a wave of critical economic data and the upcoming 2024 presidential election.
Wall Street received a boost on Monday as fears of a severe escalation in the Middle East eased after Israel’s recent attack on Iran was less intense than anticipated. Positioning in technology stocks ahead of major earnings also propelled Nasdaq near record highs.
Five of Wall Street’s “Magnificent Seven” are set to report earnings this week, with Alphabet Inc. kicking off the big tech results on Tuesday after the market close. This will be followed by Meta Platforms Inc. and Microsoft Corporation on Wednesday, with Apple Inc. and Amazon.com Inc. rounding out the week’s tech earnings on Thursday.
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