11/11/2024 - 08:56 UTCThe dollar gained against most major currencies in the past week, with the dollar index (USDX) up by 0.59%, hitting levels last seen in June following the outcome of the U.S. presidential election and the November FOMC meeting which concluded with a 25-bps rate cut as expected. Investor sentiment remains cautious ahead of crucial U.S. consumer inflation data and a series of speeches by Federal Reserve officials.
The CME FedWatch tool suggests that market participants are anticipating a more aggressive rate cut of 50 basis points in December, with a 64.9% probability, while a smaller 25 basis point cut is seen as less likely at 35.1%.
Asian markets received pressure on Monday as the 10 trillion yuan stimulus package, while significant, lacked the direct fiscal support that many had hoped for to counter slowing economic growth and the threat of US tariffs. Nonetheless, the Hong Kong 50 and the Japan 225 were seen trading slightly higher early on Monday.
Positive sentiment in Wall Street continues, with all three primary indexes logging multiple record highs last week, as the president-elect has committed to implementing policies that will reduce corporate tax burdens and increase government spending, both of which are expected to have a positive impact on corporate earnings. The Republican party is also headed for a majority in both levels of Congress, which presents a clear path for Trump to enact any major policy changes.
In the cryptos front, Bitcoin continues to post new all time highs breaking above the $81K mark early on Monday supported by an increase in global money supply and following the election of Trump that has promised upcoming policies would give Bitcoin more legitimacy as an investment vehicle, boosting its adoption by institutional investors. The overall crypto market capitalization rose from $2.67 trillion dollars to $2.88.
The focus for this week lies core inflation numbers from the US in the form of CPI and PPI, core retail sales and a speech by Fed chairman Jerome Powell at an event hosted by the Federal Reserve Bank of Dallas.
In Friday's session, the EUR/USD faces renewed selling pressure, struggling to sustain Thursday's brief recovery and hovering near the critical 1.0800 resistance level. The U.S. Dollar (USD) resumes its upward momentum after a recent pullback, limiting gains for the euro.
Trump’s electoral promises, including a potential 10% tariff increase on imports and corporate tax cuts, have been cited as drivers of the dollar’s resurgence.
Fed Chair Jerome Powell, however, downplayed any immediate implications of Trump’s return to office on the Fed's policy direction. "We don’t guess, speculate, and we don’t assume what future government policy choices will be," Powell remarked on Thursday, following the central bank’s expected 25 basis point rate cut to 4.50%-4.75%.
Gold prices declined on Friday as the U.S. Dollar staged a recovery, despite falling U.S. Treasury yields. Investors continued to assess the implications of Donald Trump’s victory in the U.S. presidential election, reducing their exposure to the so-called “Trump trade” amid uncertainty surrounding his tariff policies.
Looking ahead to this week, U.S. economic data, including comments from Fed officials and key reports on consumer and producer inflation, as well as retail sales, will be closely watched for further clues on the direction of gold prices.
Oil prices dropped over 2% on Friday as concerns eased over potential long-term supply disruptions from a hurricane in the U.S. Gulf of Mexico, while China’s recent economic stimulus measures fell short of expectations among some oil traders.
Energy producers shut down over 23% of oil production in the Gulf of Mexico in anticipation of Hurricane Rafael. The storm, which caused significant damage in Cuba earlier in the week, weakened to a Category 2 hurricane by Friday, according to the latest advisory from the U.S. National Hurricane Center.
In China, recent measures to alleviate local government debt pressures were met with disappointment by oil markets, as traders had anticipated more direct support for demand.
The US 500 briefly topped the 6,000 mark and recorded its largest weekly percentage gain in a year, buoyed by Donald Trump's election victory and the possibility of a Republican majority in Congress, which has raised expectations for pro-business policies.
Also supporting stocks was the widely anticipated 25 basis point interest rate cut from the Federal Reserve on Thursday. The US 500 and US 30 saw their strongest weekly percentage gains since early November 2023, while the US Tech 100 marked its best week in two months and the second-best of 2024.
The University of Michigan’s Consumer Sentiment Index reported a seven-month high in early November, with future expectations reaching their highest in over three years, particularly among Republican households.
On the earnings front, shares of Airbnb fell 8.72% following a weaker-than-expected Q3 profit, while Pinterest plunged 14% after issuing a disappointing revenue forecast.
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