09/08/2024 - 19:35 UTCThe dollar posted a moderate increase against most major currencies for a second consecutive session on Thursday, with a mild recovery of 0.06% seen in the dollar index (USDX) which ended the session right above the 103.0 mark. The move was partly attributed to new U.S. labor market data that showed unemployment benefits fell more than expected last week, easing fears of an imminent recession. The main focus for dollar traders now lies on inflation data due next week.
The CME FedWatch tool currently shows a 45.5% probability of a quarter-point interest rate cut by the Federal Reserve in September, while a half-point reduction is seen as more likely at 54.5%. Moreover, the market is pricing in another rate cut in November, with a 51.7% chance.
The Japan 225 jumped 2% in early Friday trading as concerns about an impending U.S. recession eased. Optimism was also boosted by mildly positive inflation figures from China. However, despite the rally, regional markets were still on track for weekly losses following significant declines at the start of the week.
Bitcoin and Ethereum, the top two cryptocurrencies by market capitalization, surged on Thursday posting gains of 11.89% and 14.52% respectively as risk sentiment improves, tracking a rally in broader markets, especially equities, following better-than-expected weekly jobless claims data. An additional boost in bitcoin derived from the fact that even though $3.2 billion in Bitcoin was allocated to Mt.Gox creditors, the market hasn’t seen a sell-off related to that distribution.
Wall Street stocks staged a strong recovery on Thursday, erasing a large portion of the week’s heavy losses. Positive corporate earnings reports and continued expectations of interest rate cuts fueled the rally. However, major U.S. indexes were still on track for a significantly negative week after Monday’s sharp decline.
For the upcoming week market participants will be watching closely for Federal Reserve commentary as expectations for substantial interest rate cuts mount while the main focus lies on inflation numbers from the US in the form of PPI and CPI data, due on Tuesday and Wednesday.
The euro posted a moderate decline against the dollar on Thursday, with the EUR/USD pair down by 0.12% for the day, following a bigger-than-expected drop in jobless claims that soothed some fears of a recession.
Initial jobless claims fell to a seasonally adjusted 233,000 for the week ended Aug. 3, the Labor Department said on Thursday, suggesting fears that the labor market is unraveling were overblown.
Market participants will be keenly focused on the upcoming week, with the Federal Reserve’s commentary under close scrutiny as speculation grows over potential interest rate cuts. However, the primary attention will be on the U.S. inflation data scheduled for release on Tuesday and Wednesday.
Gold prices gained sharply on Thursday, showing gains of 1.66% and rising past the $2,400 figure, despite a moderate US Dollar strength and reports that China’s central bank restrained itself from purchasing Gold for the third consecutive month.
The move was mainly attributed to ongoing Middle East conflicts that continue to dampen market enthusiasm, while growing expectations of significant interest rate cuts by the Federal Reserve in September could drive U.S. Treasury yields lower.
Gold traders now look for potential cues from the Federal Reserve on how it plans to prevent an economic downturn.
Oil prices gained sharply for yet another session on Thursday, with the two main benchmarks WTI and Brent surging by 0.81% and 0.5% respectively as a recent decline in US inventories, improving sentiment towards the U.S. economy and persistent geopolitical tensions boosted prices.
Oil prices continue to edge up in Asian trading on Friday, with the focus now turning to Ukraine after it mounted one of its biggest attacks on Russia since the war began in early-2022.
In China, consumer price index inflation grew more than expected in July, government data showed on Friday, while a decline in producer price index inflation was slightly less than expected. The data highlighted some improving trends in the world’s biggest oil importer
The US 500 surged by almost 3% on Thursday as initial jobless claims unexpectedly fell to 233,000 last week, defying expectations and easing concerns about a weakening labor market. The figure, lower than the previous week's revised 11-month high, comes on the heels of a disappointing nonfarm payrolls report.
In other news, Richmond Fed President Thomas Barkin tempered calls for immediate interest rate cuts, suggesting the Fed can afford to wait and assess the economic slowdown's pace.
In the earnings front, Eli Lilly stock soared 9% after the drug maker raised its annual profit forecast and sales of its popular weight-loss drug Zepbound crossed $1 billion for the first time in a quarter.
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