29/04/2024 - 07:30 UTCThe dollar posted a moderate decline against most majors in the past week, with the dollar index closing the weekly chart around 0.1% lower. The long-awaited U.S. PCE price index data came in higher than expected for March, adding to expectations that the central bank will further delay rate cuts. The focus now shifts to the FOMC monetary policy statement and the press conference that follows, where no change is expected in interest rates while the central bank is expected to present a hawkish outlook.
Investors expect the Federal Reserve to be one of the last major central banks to cut rates, with the CME Fedwatch tool, pricing in a 11.3% chance for the first rate cut to occur in June, 28% to take place in July and 45.4% in September.
In other news, the yen gained by 1.46% against the dollar on Friday, amid higher expectations for a government intervention following a crash in the Japanese currency earlier this week. The yen fell below the 155 level against the dollar, which was largely considered as a benchmark that could attract currency market intervention by the government. According to reports, while Japanese officials have offered several verbal warnings, a lack of action potentially signals limited resources to completely tackle weakness in the yen.
A new wave of optimism appears in Wall Street, with all three main stock indices ending the week in positive territory. The move came amid solid earnings reports from Microsoft and Google parent Alphabet on Thursday which helped the S&P 500 register its biggest weekly gain since November. However, some of their peers such as Tesla and Facebook parent Meta Platforms have presented a mixed picture due to disappointing reports.
For the week ahead, we are expecting earnings from megacaps that drove markets higher last year such as Amazon on Tuesday, and Apple, on Thursday. Apple shares have tumbled over 10% so far this year with China smartphone shipments falling by 19% while Amazon's cloud computing business will be in focus.
Investors are now looking ahead to the release of U.S. employment reports as well as the FOMC statement that could include key comments from Fed’s chairman Jerome Powell on the central bank’s outlook and future planning.
The EUR/USD ended the session on Friday with moderate losses of 0.25% as market participants digested the implications of the March core Personal Consumption Expenditures Price Index (PCE), the US Federal Reserve’s (Fed) preferred gauge of inflation.
Core PCE data showed a higher-than-expected reading of 2.8% YoY, when analysts had expected 2.6% from 2.8% previously, according to the US Bureau of Economic Analysis (BEA). On month, Core PCE rose 0.3% in line with expectations and the same as previously.
The preliminary Inflation Rate in Germany is due today along with the final Consumer Confidence print in the euro area.
Gold snapped a five-week winning streak Friday despite the gains of the last two sessions of the week. Heavy losses earlier in the week following easing Middle East tensions after Iran-Israel showed little appetite to escalate their tit-for-tat exchange.
The strength in the demand for the yellow metal has provided it with extra clout to withstand the weight of rising real interest rates, which have a long history of hampering investor appetite for non-interest-bearing assets like gold. A relatively strong dollar also weighed on gold, especially in the wake of a hotter-than-expected reading on the PCE price index- which is the Fed’s preferred inflation gauge.
Oil prices settled higher on Friday, garnering support from tensions in the Middle East, but a strong dollar and U.S. inflation data quashed hopes that the Federal Reserve would cut interest rates soon driving the prices back ending the session almost unchanged.
As tensions escalate in the Middle East, Israel's military said on Friday that its air force struck in Lebanon's West Beqaa District and killed a militant who advanced attacks against Israel. On the other hand, macroeconomic pressures capped gains after data released on Friday showed growing inflation. In the 12 months through March, U.S. inflation rose 2.7% after an advance of 2.5% in February.
U.S. stocks closed higher on Friday, buoyed by a rally in megacap growth stocks following robust quarterly results from technology heavyweights Alphabet and Microsoft in addition to moderate inflation data.
Market participants cheered Alphabet's first-ever dividend, its $70 billion stock buyback program, and better-than-expected first-quarter results. Its shares jumped 10% and reached a record high, lifting the Google-parent's market value above $2 trillion.
U.S. Commerce Department data showed monthly inflation rose moderately in March on an annual basis while coming in line with estimates monthly. The report offered some relief to financial markets spooked by worries of stagflation a day after data showed inflation surging and economic growth slowing in the first quarter.
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