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12/11/2024 - 08:30 UTCThe dollar continues to move higher against most major currencies on Monday, with the dollar index (USDX) up by 0.47% and still gaining early on Tuesday. The election outcome and expectations for less rate cuts from the Fed going forward continue to support the US currency with investor sentiment remaining cautious ahead of crucial U.S. consumer inflation data and a series of speeches by Federal Reserve officials.
The CME FedWatch tool suggests that market participants are anticipating a more aggressive rate cut of 25 basis points in December, with a 65.1% probability, while odds for rates to remain unchanged are at 35.1%.
Asian markets continue to receive pressure on Monday, with Hong Kong stocks declining yet again as the recent Chinese fiscal stimulus package fell short of expectations, failing to provide direct fiscal support to counter slowing growth and US tariffs. The Hong Kong 50 is seen trading down by more than 2% early on Tuesday.
Positive sentiment in Wall Street continues, with all three primary indexes logging fresh record highs on Monday, as the president-elect has committed to a policy agenda that includes corporate tax reductions and increased government expenditure, both of which are anticipated to have a positive effect on corporate profitability. All eyes are now on the upcoming CPI data for October, as investors eagerly await confirmation of cooling inflation.
In the cryptos front, Bitcoin continues to post new all-time highs reaching slightly above the $90K mark early on Tuesday, extending its recent gains amid expectations for a friendlier regulatory environment following Trump’s win in the presidential election. The overall crypto market capitalization rose from $2.88 trillion to $3.13.
The focus for Tuesday lies on the German ZEW economic sentiment report while some price action could be seen upon testimonies from several key FOMC members at the Clearing House Annual Conference, in New York. Later this week the focus will shift to core inflation data from the US, core retail sales and a speech by Fed chairman Jerome Powell.
The euro fell as low as $1.0629 during Monday’s trading session, its lowest level since April 22nd with the EUR/USD pair eventually ending the session at $1.0663. The shared currency is experiencing additional downward pressure due to political uncertainty within Germany, the bloc's largest economy as the Greens, on Monday joined opposition calls for an earlier parliamentary vote to open the way to a snap election.
On Tuesday, market participants will closely monitor the release of the German ZEW economic sentiment index and consumer inflation figures from several European economies, including Germany. Later this week the focus will shift to core inflation data from the US and core retail sales.
Spot gold prices experienced a decline from their recent peak of nearly $2,800 per ounce, driven by a surge in the US dollar and a rise in Treasury yields. Market participants are closely monitoring the upcoming release of the October Consumer Price Index data, which is anticipated to provide insights into the direction of interest rates in the future.
Looking ahead to this week, U.S. economic data, including comments from Fed officials and key reports on consumer and producer inflation, as well as retail sales, will be closely watched for further clues on the Fed’s path forward.
Oil prices experienced a sharp decline on Monday, with both WTI and Brent crude futures contracts shedding more than 2% of their value. Market sentiment was dampened by easing concerns over supply disruptions from the US Gulf Coast hurricane, and a lack of concrete fiscal stimulus measures to spur demand from China, the world’s largest oil consumer
Analysts anticipate that market attention will now shift to the forthcoming monthly oil market reports from OPEC, the IEA, and the EIA.
The US 500 briefly hit a new record high at $6053.74, still buoyed by Donald Trump's election victory and expectations for a policy agenda that includes corporate tax reductions and increased government expenditure, both of which are anticipated to have a positive effect on corporate profitability.
In corporate news, AbbVie's stock price declined by more than 12% following the announcement of the failure of its two Phase 2 trials for a schizophrenia treatment. Banking stocks are rallying on expectations of a more lenient regulatory environment under a potential second Trump administration, with JPMorgan, Goldman Sachs and Citigroup up by 1%, 2.26% and 1.75% respectively. Tesla Inc. added another 9% to its gains from the previous week, as investors speculate that closer ties between Elon Musk and a second Trump term could benefit the electric vehicle manufacturer.
The primary focus of this week is on the forthcoming release of the October Consumer Price Index data, with investors anticipating evidence of decelerating inflation.
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