14/05/2024 - 08:22 UTCThe dollar settled moderately lower against most major currencies on Monday, with the dollar index (USDX) ending the session with minor losses of 0.10% trading in a tight range 104.95 and 105.30 since Friday. Upcoming inflation data in the form of core monthly producer prices will be closely watched by investors as further signs of sticky inflation are likely to further diminish expectations of interest rate cuts by the Federal Reserve. The overall inflation rate is expected to remain above the Fed’s 2% annual target rate, giving the central bank little reason to move with an immediate rate cut. According to reports, Wednesday’s crucial CPI report could show inflation rising 3.6% on an annual basis, marking its smallest increase in over three years.
According to the CME Fedwatch tool, bets for a rate cut in June are currently at 3.5% while July and September stand at 24.6% and 48.6% respectively.
A solid trading session was observed in the US energy sector, as the two main crude oil benchmarks WTI and Brent, both gained by more 1% amid signs of improving demand from the U.S. and China. Additional support came from bullish comments from Iraq's oil minister, who said that the country would honour voluntary output cuts made by OPEC+, at its upcoming meeting on June 1.
In other news, sentiment in Wall Street appears subdued, with equity traders remaining on the sidelines looking for new catalysts in the upcoming inflation data and in key speeches from Fed officials including the speech of Fed chairman Jerome Powell later today where they will look for hints on the central bank’s monetary easing outlook. In addition, markets also anticipate some fresh insights into the health of the U.S. consumer this week with April retail sales data due on Wednesday, plus earnings results from major retailers Walmart and Home Depot. Other key earnings due this week include Dynatrace, Cisco, Baidu, Take-Two Interactive and EQUINIX.
Aside from US economic releases, some price action could also be observed later today, upon the release the ZEW economic sentiment index.
The EUR/USD pair rose on Monday ending the session 0.20% higher due to improved market sentiment. The major currency pair holds gains as traders have priced in that interest rate cuts from the European Central Bank (ECB) will be more and start earlier than the Federal Reserve (Fed).
US Producer Price Index (PPI) inflation numbers are due during Tuesday’s US market session. This week, the Euro will be guided by Eurozone Q1 preliminary Gross Domestic Product (GDP) data, which will be published on Wednesday. The GDP data will provide fresh cues about the Eurozone’s economic outlook. EUR/USD will also be guided by the US Consumer Price Index (CPI) data for April, which is also set to be released on Wednesday.
Gold prices experienced a sharp decrease on Monday ending the session 0.93% lower as investors awaited crucial U.S. inflation data, which could offer insights into the timing of the Federal Reserve's initial rate adjustment.
The U.S. is anticipated to release the producer price index (PPI) data on Tuesday, with the consumer price index (CPI) following on Wednesday.
Gold prices are seen trading slightly lower today amid profit taking as focus turns on the U.S. inflation data and Fed's Chairman's comments later in the week.
Oil prices settled higher Monday, as signs of an improving economy in China boosted demand hopes at time when wildfires in Canada threaten supplies.
Chinese inflation data for April, released over the weekend, showed a sustained recovery in consumer price index inflation, boosted hopes that demand and economy growth continued to recovery following substantial monetary support from Beijing.
Helping the tone Monday was the news of an evacuation alert for Fort McMurray, Alberta, as an out-of-control fire rages southwest of the major Canadian oil town, making it among the first actions ahead of the wildfire season.
Crude oil prices were also helped by a weakness in the dollar as investors awaited key inflation data this week
U.S. stock index futures moved little on Monday, as investors hunkered down ahead of key inflation readings that are likely to factor into interest rates. US 500 and US Tech 100 ended the session slightly higher while US 30 posted minor losses. Investor sentiment on risk assets remains cautious as investors look ahead to key inflation data this week, with the producer price index and consumer price index due on Tuesday and Wednesday, respectively.
Arm Holdings gained 7% after announcing plans to develop artificial-intelligence chips, according to a report in Nikkei Asia, with the U.K.-based chip designer announcing plans to set up an AI chip division. Videogame retailer GME rose nearly 24% after a 74% rally during the session.
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