28/11/2024 - 08:02 UTCThe U.S. dollar fell against most major currencies on Wednesday, with the dollar index (USDX) down for a second day in a row, losing 0.75% of its value. Trading volumes in the U.S. dollar have lightened following ahead of the U.S. Thanksgiving holiday, while robust employment and inflation readings dampened expectations for significant monetary easing by the Federal Reserve in its upcoming meetings.
Meanwhile according to the CME FedWatch Tool, market participants are currently assigning a 68.2% probability to a 25 basis point interest rate cut by the Federal Reserve. However, there is a significant 31.8% probability that the Fed will maintain interest rates at their current level.
Even as the US 30 hit a new record high on Thursday, bullish sentiment eased mid-day with all three primary stock indices ending the session moderately lower following a series of key economic reports and cautions trading ahead of the Thanksgiving holiday. The move came after the release of the PCE price index for October which was in line with market expectations, while the annual figure rose beyond forecasts. Nonetheless, data continues to fuel optimism for a potential December rate cut, however, signs of persistent inflation have raised some concerns about the extent of future rate cuts.
Oil prices remained steady throughout Wednesday’s session, with the two primary benchmarks WTI and Brent fluctuating between gains and losses, after Israel and Lebanese militant group Hezbollah agreed to a ceasefire deal in Lebanon. But Israel still kept up its offensive in Gaza, undermining expectations for more stability in the Middle East.
On the cryptos front, Bitcoin recovered from monthly lows of just above $90K and is currently hovering right below the $97K mark as of 07:25 AM GMT on Wednesday. Reports suggest that Trump’s administration wants to shift a bulk of crypto regulatory oversight to the Commodity Futures Trading Commission from the Securities and Exchange Commission, Fox Business reported on Wednesday. The CFTC oversees the U.S. derivatives market, and is seen as having less strict regulatory standards than the SEC.
For Thursday, markets will most likely be focusing on inflation numbers from Germany as well as the M3 money supply report from the eurozone indicating the change in the total quantity of domestic currency in circulation and deposited in banks. A quiet session is expected today in light of the US Thanksgiving Day.
The EUR/USD pair found broad support on Wednesday, ending the session 0.67% higher. The pair's rebound was largely driven by a pullback in recent U.S. Dollar strength, reflecting a shift in market sentiment rather than any inherent improvement in the Euro’s fundamentals.
Wednesday’s economic calendar heavily favored U.S. data releases, ahead of today's Thanksgiving holiday and reduced trading hours on Friday. The annualized U.S. Gross Domestic Product (GDP) for Q3 grew by an expected 2.8%, delivering no surprises and leaving markets relatively unfazed. Similarly, the Core Personal Consumption Expenditures Price Index (PCEPI) for October rose to 2.8% year-over-year, in line with forecasts.
Looking ahead, EUR/USD traders will be keenly focused on Friday’s preliminary release of the pan-EU Harmonized Index of Consumer Prices (HICP) inflation data.
Gold prices rebounded on Wednesday supported by a weaker U.S. Dollar following the release of U.S. economic data.
The Federal Reserve's (Fed) preferred inflation measure, the Core Personal Consumption Expenditures (PCE) Price Index, reinforced expectations for a gradual policy approach.
Economic data also painted a picture of resilience in the U.S. economy. The second estimate of third-quarter GDP growth confirmed a 2.8% annualized expansion, while labor market figures showed strength as jobless claims fell below forecasts.
Despite a ceasefire agreement between Lebanon and Israel, Gold prices held firm as ongoing tensions in the Russia-Ukraine conflict kept safe-haven demand alive.
U.S. oil prices ended slightly lower on Wednesday as traders assessed the impact of a ceasefire deal between Israel and Hezbollah alongside a larger-than-expected drop in U.S. crude inventories.
Oil prices saw some recovery from earlier losses after reports confirmed progress on a ceasefire agreement between Israel and Hezbollah. At the same time, risks remain, with the Russia-Ukraine war escalating last week, adding uncertainty to global crude supply chains and maintaining a geopolitical risk premium in the oil market.
The Energy Information Administration (EIA) reported a sharper-than-expected decline in U.S. crude inventories, with stockpiles dropping by 1.8 million barrels for the week ending November 22, surpassing forecasts of a 1.3-million-barrel draw.
With Thanksgiving set to reduce U.S. market activity on Thursday and Friday, attention is now shifting to Sunday’s OPEC+ meeting.
Wall Street’s major indexes ended lower on Wednesday, with the US Tech 100 leading declines, as technology stocks slumped amid concerns that the Federal Reserve may take a cautious approach to rate cuts following persistent inflationary pressures.
October data revealed a solid increase in consumer spending, underscoring the U.S. economy’s continued momentum. However, progress in reducing inflation appears to have stalled, raising concerns about the Fed's next moves.
Tech stocks weighed heavily on the market, with Dell plunging 12% and HP shedding nearly 6% after issuing disappointing quarterly forecasts.
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