17/09/2024 - 07:29 UTCThe US dollar fell deeper into negative territory on Monday, with the dollar index (USDX) down by another 0.36% for the session and down by around 1.4% from weekly highs. Gold prices surged to an all-time high of $2,589.97 per ounce on Monday, fueled by growing expectations that the Federal Reserve would implement a significant interest rate reduction at its upcoming meeting.
Traders were increasingly confident that a 50 basis point rate cut was more likely than a 25 basis point cut, according to data from CME's Fedwatch tool. According to the CME's FedWatch tool, the market is currently pricing in a 67% chance of a 0.50% interest rate reduction by the Federal Reserve in September. A smaller cut of 0.25% is now seen as less likely at 33%.
Ahead of the Federal Reserve's highly anticipated policy meeting, U.S. markets traded in a mixed fashion on Monday. The US 30 reached a new high, while the US 500 gained slightly. However, the US Tech 100 fell, reflecting some investor concerns regarding the impact of a less aggressive rate cut than the 50 bps. Markets were also somewhat nervous following reports of a second attempted assassination attempt on Republican presidential candidate Donald Trump.
In corporate news, Pfizer's stock surged 2.7% on Monday after positive results from a mid-stage trial of its experimental drug for cancer-related appetite loss. In contrast, Boeing shares fell 0.7%, extending a decline from the previous week, as a strike by thousands of workers entered its fourth day. Intel stock climbed 6.4% after qualifying for up to $3.5 billion in federal grants to manufacture semiconductors for the U.S. Department of Defense.
The focus for this week is around the Fed which is set to conclude its monetary policy meeting on Wednesday and any action it takes is likely to set the tone for the weeks to come. Additional monetary policy meetings are scheduled from the Bank of Japan and the Bank of England this week, where no changes to interest rates are anticipated from either. In the US, aside from the long awaited FOMC statement, data on US retail sales and industrial production are due.
The EUR/USD pair saw a rise on Monday, buoyed by shorting pressure on the US Dollar, as the pair climbed back above the 1.1100 level, which had previously capped intraday gains at the end of last week. Risk-on sentiment dominated market action as investors turned their attention to anticipated rate cuts from the Federal Reserve (Fed).
On the European front, the economic calendar offers little to shift market dynamics, with the exception of European Central Bank (ECB) President Christine Lagarde’s scheduled appearance.
As the week unfolds, US economic data takes center stage, with today's Retail Sales update being closely watched. Investor consensus points toward the Fed beginning a rate-cutting cycle on Wednesday.
Gold prices gained 0.17% on Monday supported by a weakening US Dollar as traders look ahead to Wednesday’s Federal Reserve monetary policy decision.
A decline in US Treasury yields also provided support for gold, as the 10-year US Treasury note fell by 2.5 bps to 3.631%, benefiting the non-yielding metal.
In the geopolitical arena, risks of escalating conflict in the Middle East, coupled with an apparent assassination attempt on former US President Donald Trump, added downward pressure on the US Dollar, according to Bloomberg.
Oil prices rose on Monday, buoyed by the continued disruption from Hurricane Francine on production in the U.S. Gulf of Mexico, which offset concerns about weakening Chinese demand ahead of this week’s Federal Reserve interest rate decision.
According to the U.S. Bureau of Safety and Environmental Enforcement (BSEE), more than 12% of crude oil production and 16% of natural gas output in the Gulf of Mexico remained offline following the storm.
Despite these gains, market caution prevailed as traders looked ahead to Wednesday’s Federal Reserve interest rate decision.
Weaker economic data out of China over the weekend dampened market sentiment. The world’s top oil importer saw its industrial output growth slow to a five-month low in August, while retail sales and new home prices also weakened.
U.S. main indexes posted a mixed picture on Monday with the US 500 and US 30 ending the session higher while the US Tech 100, dragged down by a drop in technology stocks.
Investors remained cautious as they weighed the potential for a larger-than-expected rate cut from the U.S. Federal Reserve this week.
Apple dropped 2.78%, after an analyst from TF International Securities reported weaker-than-expected demand for the latest iPhone 16 models.
Among individual stocks, Intel Corp surged 6.41% after reports indicated it could receive up to $3.5 billion in federal grants to produce semiconductors for the U.S. Department of Defense.
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