21/10/2024 - 07:50 UTCThe U.S. dollar retreated against most of its major peers on Friday, following five consecutive sessions of gains, with the dollar index (USDX) down by 0.25%. This move coincided with an increase in risk appetite, driven by the latest round of stimulus measures implemented by the Chinese government, which significantly boosted global equity markets Investors. The U.S. dollar has experienced a surge in recent weeks, primarily driven by a shift in market expectations regarding Federal Reserve monetary policy. Investors are increasingly anticipating a more gradual easing phase, following a series of positive U.S. economic indicators.
The focus for the weeks to come is shifted to the upcoming US elections and the November interest rate decision. According to some analysts, adding to the dollar's overall shine was the rising prospect of former president Trump winning the November election, since his proposed tariff and tax policies are seen as likely to keep U.S. interest rates high. Based on the CME Fedwatch tool, the probability of a 25-basis-point interest rate reduction is currently at 99.4%, while odds for a 50-bps rate cut are at 0.6%.
The U.S. stock market concluded the trading session with a strong performance, as all three primary stock indices closed in the green, with the US 30 writing a new record high mainly bolstered by investor confidence in corporate earnings. The upcoming week will feature the release of quarterly financial results from several high-profile companies, including the electric vehicle manufacturer Tesla, the aircraft manufacturer Boeing, the telecommunications giant Verizon, and the industrial heavyweights GE Aerospace and Honeywell.
On the energy front, WTI and Brent retreated by roughly 2.67% and 1.56% respectively, following the release of data indicating a slowdown in China's economic growth and amidst a growing sense of optimism regarding the conflict between Israel and Iran.
Some key events in the week ahead include the U.S. existing and new home sales, EU and US flash manufacturing & services PMIs, U.S. jobless claims and UoM consumer sentiment, the German IFO business climate and monthly durable goods orders. Some price action could also be seen upon a speech by ECB president Lagarde.
The EUR/USD pair saw a modest rebound on Friday, ending a four-day decline.
The primary driver behind the euro's gains was a broader market shift in risk sentiment, which led to a selloff in the U.S. dollar, rather than any specific strength in Eurozone markets.
Earlier in the week, the European Central Bank (ECB) implemented a rate cut, which did little to support the euro in the short term.
In the U.S., housing and construction data on Friday showed mixed results, yet this did not deter investors, who remained in a buying mood. Fears of an imminent economic slowdown appear to be diminishing, as recent growth and activity figures have consistently outperformed expectations.
Gold prices continued to climb on Friday, reaching new record highs after breaching the $2,700 mark, driven by uncertainty surrounding the U.S. election and escalating tensions in the Middle East.
Geopolitical factors have taken center stage, particularly after Israel confirmed the death of Hamas leader Yahya Sinwar. Meanwhile, Hezbollah has announced it is escalating its conflict with Israel, with U.S. Defense Secretary Lloyd Austin suggesting this development could present an opportunity for a ceasefire.
The Federal Reserve is widely expected to cut interest rates by 25 basis points at its November meeting, with CME FedWatch Tool data showing a 92.9% probability.
Oil futures declined on Friday, as concerns about China's economic slowdown and a mixed geopolitical outlook in the Middle East weighed on prices.
In China, the world’s largest oil importer, the economy grew at its slowest pace since early 2023 in the third quarter, although September consumption and industrial output exceeded expectations.
On the geopolitical front, U.S. President Joe Biden commented on the possibility of resolving tensions between Israel and Iran, which led to a reduction in the geopolitical risk premium on oil prices. However, the situation remains volatile.
U.S. main indexes ended the session on Friday with gains. as strong earnings from Netflix and broader gains across technology stocks lifted markets.
All three major Wall Street indices logged their sixth consecutive weekly gain, marking the longest winning streak since late 2023.
Netflix shares surged 11.1% to a record closing high after the streaming giant exceeded Wall Street estimates for subscriber growth and projected continued momentum through year-end.
Robust earnings and positive economic data have been key factors supporting the recent upward momentum in the three major indices.
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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