13/11/2024 - 08:30 UTCThe dollar continues to move higher against most major currencies on Tuesday, with the dollar index (USDX) up by another 0.42% hitting levels last seen in May and trading right above the 105.0 mark. The election outcome and expectations for less rate cuts from the Fed going forward continue to support the US currency with Morgan Stanley forecasting continued strengthening as the incoming Trump administration implements its proposed agenda.
The CME FedWatch tool suggests that market participants are anticipating a more aggressive rate cut of 25 basis points in December, with a 62.1% probability, while odds for rates to remain unchanged are at 37.9%.
Asian markets declined on Wednesday, with the Japan 225 down by around 1.8% and the Hong Kong 50 down by more than 2.8% as at 07:23 AM GMT. Investors appear concerned about the potential impact of a Trump presidency on Sino-U.S. relations and global trade. Markets now anticipate further fiscal stimulus which could possibly boost consumer spending and the property market. Bloomberg reported that Japan was considering cutting homebuying taxes to support the property sector.
Sentiment in Wall Street remains cautious ahead of crucial U.S. consumer inflation data and a series of speeches by Federal Reserve officials with all primary indexes closing moderately lower on Tuesday. Additional pressure came from a surge in US 10-year bond yields to their highest since late July.
In the cryptos front, Bitcoin pulled back from its all-time high of $90K and is currently hovering around the $86K to $88K mark with investors. Dogecoin, a popular meme coin, pulled back on Wednesday after a recent surge to a three-year high. Traders took profits following Trump's announcement that Elon Musk and Vivek Ramaswamy will lead the Department of Government Efficiency. The overall crypto market capitalization rose to record highs of over three trillion dollars.
The focus for Wednesday lies on the core CPI data report while some price action could also be seen upon testimonies from several key FOMC members. Some price action could be seen later this week upon the release of U.S. Producer Price Index data on Thursday and retail sales on Friday.
The euro fell as low as $1.0595 on Tuesday, its lowest level since November 2023, following a surge in US treasury yields and ahead of key inflation data from the US. The CPI index is expected to have remained steady in October from the prior month amid continued resilience in the US economy, but any signs of elevated inflation could potentially delay the Federal Reserve’s plans to cut interest rates further.
In addition to CPI data, investors will also be watching speeches from several Fed officials for clues on future rate hikes.
Spot gold prices extended their decline on Tuesday, currently trading approximately 1.8% lower on a weekly basis. The drop in prices is primarily attributed to a strengthening US dollar and an increase in Treasury yields.
Market participants are closely monitoring the upcoming release of the October Consumer Price Index data, which is expected to shed light on the future direction of interest rates. Looking ahead, US economic data, including commentary from Federal Reserve officials and key reports on consumer and producer price inflation, as well as retail sales, will be scrutinized for further indications of the Fed's policy plans ahead.
Oil prices traded almost unchanged on Tuesday following a sharp decline the day before, with both WTI and Brent trading around 3% lower on the weekly chart as of 07:30 AM GMT Wednesday.
The Organization of Petroleum Exporting Countries reduced its projection for global oil demand growth in 2024 for the fourth consecutive month citing persistent concerns over slowing demand in China and other major oil-importing nations. OPEC now anticipates a demand increase of 1.82 million barrels per day, a downward revision of 107,000 barrels per day from the previous month's forecast. The cartel has consistently lowered its demand outlook amidst ongoing economic weakness in China and growing global adoption of cleaner energy sources.
Analysts anticipate that market attention will now shift to the forthcoming US crude oil inventory numbers.
The US 500 fell from its record high of $6053.74, ending Tuesday 0.33% lower, as optimism over a Donald Trump presidency appears to be cooling and as investors remain cautious ahead of key US inflation data.
In corporate news, the quarterly earnings season is winding down, but several companies still have results to report. Home Depot stock dipped 1.3% after raising its sales forecast, betting on strong demand from contractors. Shopify stock surged 20% on a better-than-expected revenue forecast and Hertz stock gained nearly 9% despite a wider-than-expected loss and third-quarter loss and missed revenue estimates. Netflix was also in the spotlight, up nearly 2%, after announcing that the advertising-tier of its streaming service now has 70 million monthly active users.
The materials contained on this document should not in any way be construed, either explicitly or implicitly, directly or indirectly, as investment advice, recommendation or suggestion of an investment strategy with respect to a financial instrument, in any manner whatsoever. Any indication of past performance or simulated past performance included in this document is not a reliable indicator of future results. For the full disclaimer click here.
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