19/06/2024 - 07:58 UTCThe US Dollar traded in the red following the release of US Retail sales after being positive for the most part of this Tuesday. Headline Retail Sales came in at 0.1% for May, missing the 0.2% consensus call. Retail sales data indicated signs of exhaustion among U.S. consumers, boosting the case for Federal Reserve rate cuts later this year.
New York Fed President John Williams said that interest rates would decrease gradually if the disinflation process continued to evolve toward the Fed’s 2% annual core inflation goal. Richmond Fed President Thomas Barkin was cautious, saying he needs to see more data before easing. Later, Boston Fed President Susan Collins said she isn’t carried away about just one good reading on inflation and added that it’s not time to cut rates.
Market expectations, as reflected by the CME FedWatch Tool, heavily favor a rate cut by the Fed in September (59.00%) with November also a strong possibility (48.9%).
On the energy front, oil prices continued their upward trend on Tuesday reaching new highest levels in a month, with the two main benchmarks WTI and Brent, up by 0.52% and 1.11% respectively. The escalation of the geopolitical risk in Europe and the Middle East drove the prices higher. The ongoing attacks on Russia's oil refining complex pose a threat to physical global supply, as well as boosting the risk premium priced into crude futures.
The AI momentum keeps US 500 and US Tech 100 reaching new all-time high peaks. Nvidia became the world’s most valuable company ending the session with a market capitalization of $3.22 trillion. Other chip stocks also extended their recent rallies, with Qualcomm, Arm holdings and Micron advancing between 2.19% and 8.61%
A quiet Wednesday is expected today with low-impact EU Data and darkened US markets due to a midweek holiday shutdown. On the other hand, the UK Office for national statistics will publish the May CPI report early on Wednesday. UK inflation is expected to cool down. The Bank of England will announce its decision on monetary policy on Thursday.
The EUR/USD ended the session almost unchanged moving forward to a quiet Wednesday that sees low-impact EU data and darkened US markets for a midweek holiday shutdown.
Wednesday’s economic calendar is muted with US markets darkened for the Juneteenth midweek holiday and only mid-tier releases on offer for the Euro.
The European Central Bank’s (ECB) latest Economic Bulletin will be released, and German Producer Price Index (PPI) figures are expected to recover.
Market participants turn their focus to Friday’s Purchasing Managers Index (PMI) print, where the trading week will wrap up with an update on economic activity expectations for June.
Gold prices rose on Tuesday after economic data from the United States (US) hinted that consumer spending is constraining due to a softer-than-estimated Retail Sales report. This fuelled speculation that the Federal Reserve (Fed) could begin its easing cycle this year.
Even though most policymakers struck a neutral stance, US Treasury yields reflect investors beginning to price in rate cuts. The 10-year Treasury note yield is down six basis points at 4.219%.
Oil prices settled higher on Tuesday due to escalating geopolitical risk in Europe and the Middle East, where wars continue to threaten global supply.
Prices rose after a Ukrainian drone strike caused a large fire in a fuel tank at an oil terminal in Russia's southern port of Azov, according to Russian officials and a Ukrainian intelligence source. The ongoing attacks on Russia's oil refining complex pose a threat to physical global supply, as well as boosting the risk premium priced into crude futures.
Official inventory data from the U.S. Energy Information Administration will be released on Thursday, delayed a day due to the Juneteenth holiday.
The US 500 and US Tech 100 closed at record highs on Tuesday, buoyed by Nvidia's continued surge to new peaks, while the US 30 ended barely higher in subdued pre-holiday trading following softer-than-expected U.S. retail sales data.
Nvidia overtook Microsoft to become the world's most valuable company, ending the day with a market capitalization of $3.22 trillion.
Retail sales rose 0.1% in May, versus the 0.3% growth forecast by economists polled by Reuters, while another report showed surprisingly strong May industrial production and manufacturing output.
Following the news, markets slightly increased bets on two Federal Reserve interest rate cuts this year, despite U.S. central bankers' most recent projections for just one easing.
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