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23/09/2024 - 08:13 UTCThe US dollar traded almost unchanged against most major currencies on Friday, with the dollar index (USDX) hovering at multi-month lows last seen in July 2023. Several Fed members spoke on Friday, expressing different views regarding the Fed’s decision to cut rates by 50bps while underlining the importance of upcoming economic data releases in the Fed’s decision-making. Traders are gearing up for a barrage of economic indicators that could significantly impact the US dollar. The upcoming release of the US PMI flash data could be a pivotal moment, with a stronger-than-forecast result potentially bolstering the greenback.
According to the CME's FedWatch, the market is pricing in a 51.2% probability of a 0.25% rate cut in November. Bets for a 50 bps rate currently stand at 48.8%.
In other news, Hezbollah and Israel exchanged heavy fire on Sunday, as the Lebanese militant group launched missiles deep into northern Israeli territory after facing some of the most intense bombardment in almost a year of conflict, according to CNN. This could have an impact on oil prices, with the two primary benchmarks WTI and Brent coming from a strong Friday session where they recorded gains of 2.39% and 2.9% respectively.
Wall Street's primary indices had rallied to record highs last week after the Fed cut interest rates and marked the beginning of an easing cycle. But gains cooled towards the end of the week, given that future rate cuts still largely depend on the path of the U.S. economy. A key report that weighs heavily on the Feds monetary policy decisions is the PCE price index data, the Fed’s preferred inflation gauge. This report is due on Friday, and could offer more cues on interest rates while inflation is still trending well above the Fed's 2% annual target.
Several key releases are on tap later today, including U.S. and Eurozone Flash Manufacturing and Services PMIs, as well as speeches from several FOMC Members. In the week ahead, the focus turns to U.S. CB Consumer Confidence, GDP, New Home Sales and the Core PCE Price Index while speeches from Treasury Sec Yellen and Fed Chair Powell will also be closely watched.
The EUR/USD pair remained almost unchanged on Friday above the level of 1.11600. Philadelphia Fed President Patrick Harker remarked that the U.S. central bank has successfully navigated a difficult economic environment in recent years. He likened monetary policy to driving a bus, where maintaining a careful balance of speed is crucial.
Regarding the euro, European Central Bank (ECB) President Christine Lagarde underscored in her Friday address the need for monetary policy to remain flexible in an ever-changing world.
Traders will be closely watching the release of the Purchasing Managers Index (PMI) data from the Eurozone and Germany later in the day. As a key economic indicator, the monthly PMI provides valuable insights into business activity, offering a glimpse into overall economic conditions and trends.
Gold prices surged past $2,600, reaching new all-time highs as speculation grows that the Federal Reserve (Fed) will continue to lower borrowing costs.
Fed Governor Christopher Waller supported a 50 basis point rate cut, citing expectations that the August Personal Consumption Expenditures (PCE) Price Index would come in significantly low.
Looking ahead to this week, the Fed will dominate the spotlight with speeches from Atlanta Fed’s Raphael Bostic, Chicago’s Austan Goolsbee, and Minnesota’s Neel Kashkari. On the economic data front, S&P Global Flash PMIs, housing data, and the Core Personal Consumption Expenditures (PCE) Price Index, the Fed’s preferred inflation measure, will shape the Gold outlook.
Oil prices posted a second consecutive week of gains, supported by a U.S. interest rate cut and a decrease in U.S. supply.
Although concerns about a slowing economy in China, a major commodity consumer, capped gains, both benchmarks rose for the week.
Additional support for oil prices came from a drop in U.S. crude inventories, which hit a one-year low last week. Rising tensions in the Middle East also boosted the market. On Friday, Israel announced it had killed a top Hezbollah commander in an airstrike on Beirut, raising fears of broader conflict.
Wall Street ended the day with minor losses on Friday while the dollar strengthened as investors continued to absorb the Federal Reserve's midweek 50-basis-point rate cut, which marked the beginning of a rate-reducing cycle.
All three major U.S. stock indices finished the week higher, staying close to the all-time highs reached on Thursday as investors moved into riskier assets.
Nike (NYSE: NKE) helped lift the Dow, with shares rising after the company announced that former senior executive Elliott Hill would return to succeed John Donahoe as CEO.
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