20/06/2024 - 07:58 UTCThe U.S. dollar traded between gains and losses struggling for direction against other major currencies on Wednesday, with the dollar index (USDX) ending the session with a moderate decline. Some price action could be observed. Disappointing U.S. retail sales data sparked a sell-off in the dollar overnight, as investors interpreted it as a sign of sluggish economic growth and a potential shift towards Fed rate cuts later this year.
Market expectations, as reflected by the CME FedWatch Tool, heavily favor a rate cut by the Fed in September (59.5% with November also a strong possibility (50.6%).
In other news, the sterling held steady ahead of a BoE meeting, where the bank will make public its monetary policy decision. The BoE is widely expected to keep rates steady on Thursday, and the focus will be on any guidance on how soon an easing cycle could begin.
Optimism continues to run high on Wall Street, all three main stock indices marking new all-time highs on a daily basis, driven by hype in the AI space and anticipation of key economic data and Fed speeches. Om Wednesday, U.S. financial markets were closed for the Juneteenth holiday, potentially limiting trading activity a day after Nvidia surpassed Microsoft to become the world's most valuable company. Nvidia's stock price rose more than 3% to $135.58 in the prior session, pushing its market cap to $3.34 trillion and above Microsoft's valuation of $3.31 trillion. Dell Technologies Inc led by CEO Michael Dell, has announced a partnership with NVIDIA Corporation to construct an AI Factory designed to boost the capabilities of Grok, an AI model developed by Elon Musk's company
Economic data takes center stage today with the Bank of England making public its interest rate decision while later on US jobless claims, US building permits, the Philly Fed Manufacturing Index, US housing starts and EU Consumer Confidence numbers are due.
The EUR/USD pair ended the session with minor gains on Wednesday with the US markets out for a midweek holiday while the second half of the trading week with mid-tier data on the offering, leaving investors to look ahead to Friday’s Purchasing Managers Index (PMI) activity figures for meaningful data releases to drive sentiment in either direction.
Moreover, later today market participants could focus on the release of the latest US Initial Jobless Claims for the week ending June 14.
The European Central Bank’s (ECB) latest Economic Bulletin is expected early on Thursday, but little new information is expected as the ECB rehashes what has already been covered in previous public appearances from ECB policymakers following the latest rate call.
Gold prices traded in a tight range in quiet markets on Wednesday. A lack of risk sentiment and low holiday volume caps volatility in the safe-haven asset.
Moreover, geopolitical tensions and renewed political uncertainty in Europe lend additional support to the safe-haven precious metal. Meanwhile, the Fed last week adopted a more hawkish stance, and policymakers continue to argue in Favor of one rate cut in 2024.
Oil prices retreated on Wednesday after hitting seven-week highs as summer demand optimism and concerns over escalating conflicts offset an industry report that said U.S. crude inventories unexpectedly rose.
U.S. crude stocks rose by 2.264 million barrels in the week ended June 14, market sources said on Tuesday, citing American Petroleum Institute figures. Analysts polled by Reuters had expected a 2.2-million barrel draw in crude stocks.
Official stocks data from the U.S. Energy Information Administration is due on Thursday.
U.S. main indexes ended the session almost unchanged on Wednesday amid a quiet session due to the bank holiday.
Data on Tuesday showed U.S. retail sales barely rose in May and figures for the prior month were revised considerably lower, suggesting economic activity remained lacklustre in the second quarter. The numbers led to a small boost in rate-cut expectations for September.
Fed officials are looking for further confirmation that inflation is cooling and for any warning signs from a still-strong labour market as they steer cautiously toward what most expect to be a rate cut or two by the end of this year.
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