23/04/2024 - 08:11 UTCThe dollar gained against most major currencies on Monday, touching a 34-week high against the yen, while the USDX is trading at levels last seen in October 2023 on the iFOREX platform. Hawkish comments from Federal Reserve officials continue to support the "higher-for-longer interest rates" scenario while in Japan, investors are on edge, waiting for any signs of intervention by Japan to boost its struggling currency. For this week, market focus turns towards growth and inflation data, due from the US as well as a monetary policy statement expected from the Bank of Japan followed by a press conference.
According to the CME Fedwatch tool, bets that the first-rate cut will occur in June remain stable at 15% for the past two days. Goldman Sachs analysts expressed the view that the long-awaited rate cuts are unlikely to be significantly negative for the Dollar because they are unlikely to erode the Dollar’s position as a safe-haven currency with strong capital return prospects. The bank also expects the upcoming U.S. election should start affecting currency markets more directly.
Wall street sentiment is improving, as the main stock market indices all traded in the green on Monday following a surge in the S&P 500 which rebounded from its biggest weekly loss since March last year. Investors now look ahead to quarterly earnings from big tech as Tesla reports on Tuesday, Facebook-owner Meta Platforms follows on Wednesday and Microsoft and Google-owner Alphabet is due to report on Thursday.
Cryptocurrency markets continue their ascend, with Bitcoin and Ethereum both approaching their recently reached highs while the estimated crypto market is standing at approximately $2.55 trillion out of which 1.3 trillion derives from Bitcoin. According to CoinShares reports, following the halving, Bitcoin investment products, specifically exchange-traded funds, saw outflows of about $192 million in the week to April 21.
On Tuesday, monthly flash manufacturing and services data from the eurozone, the UK and the US while later in the day, the US will publish the Richmond Fed manufacturing index and a report on new home sales. The main highlight for this week is the Core PCE price index due on Friday, where expectations are for a monthly change of 0.3%
The EUR/USD pair saw a little change after a quiet Monday ahead of a densely-packed economic data docket.
Both the US and the wider Eurozone area will see updates to Purchasing Managers Index (PMI) figures on Tuesday, with high-tier US data due in the back half of the trading week as rate-hungry markets continue to froth for rate cuts from the US Federal Reserve (Fed).
Tuesday brings Eurozone PMIs for April, with the Composite PMI expected to recover to 50.8 in April compared to the previous month’s 50.3. Germany’s Composite PMI is also expected to climb further to 48.6 from the previous 47.7. The broader European Manufacturing PMI is expected to remain in contraction territory but recover ground to 46.5 from the previous 46.1. On the US side is expected to print at 52.0 for both the Manufacturing and Services components.
Gold prices dropped more than 2% to a one-week low on Monday as worries over a wider Middle East conflict subsided, prompting investors to scale back safe-haven trades in favour of riskier assets like equities. Tehran downplayed Israel's retaliatory drone strike against Iran, in what appeared to be a move aimed at averting regional escalation.
Moreover, gold came under pressure as Wall Street's main indexes opened higher, cutting demand for the safe-haven and non-interest paying asset. Market Participants are now waiting for the release on Friday of the U.S. personal consumption expenditures (PCE) report for cues on the prospect of U.S. interest rate cuts.
Oil prices settled lower Monday, extending losses from the prior week on easing fears of an Iran-Israel escalation after Tehran said it would not seek to retaliate to Israel strike last week. Iranian Foreign Minister Hossein Amirabdollahian told NBC News the Islamic Republic doesn't intend to retaliate against Israel for the latter's strike last week.
Moreover, demand concerns remain as investors weighed the prospect of higher for longer U.S. interest rates weighing on economic growth.
U.S. stocks were higher after the close on Monday, as gains in the Technology, Financials and Utilities sectors led shares higher.
Wall Street indexes rebounded from two weeks of steep losses on Monday, led chiefly by the tech sector as substantially lower valuations attracted a measure of bargain hunting.
Including Tesla which is due to report earnings today, four of the “Magnificent 7” stocks are set to report earnings this week. Facebook owner Meta Platforms Inc will report earnings on Wednesday, followed by Microsoft Corporation and Google owner Alphabet Inc on Thursday.
Moreover, PCE price index data- the Fed’s preferred inflation gauge- is due later this week, and is set to offer more cues on interest rates.
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