10/05/2024 - 07:46 UTCThe dollar settled lower against most major currencies on Thursday, following a series of increases, with the dollar index (USDX) ending the session 0.29% lower. According to reports, the move could be attributed to a decline in treasury yields and an increase in expectations that the Federal Reserve will start cutting interest rates by September, although inflation data due next week could be a key factor in this aspect. The consumer price index for April is expected to come out lower after elevated numbers seen in the past three months, however, it is still likely to remain above the Fed’s 2% target.
According to the CME Fedwatch tool, bets for a rate cut in June are currently at 8.5% while July and September stand at 30.8% and 49.6% respectively.
In other news, the Bank of England opened the door for an interest rate cut with Governor Andrew Bailey saying that possibly the central bank would need to cut rates by more than investors expect. Nonetheless, the central bank’s Monetary Policy Committee had voted 7-2 to keep the central bank's key policy rate at a 16-year high of 5.25%.
Wall street sentiment appears improved on Thursday, as all three main US stock market indices posted some sharp gains following a drop in treasury yields and signs of cooling labor market. The US 30 that tracks the performance of the DOW future, was up for a seventh day in a row and according to reports, this move was mainly supported by renewed hopes the central bank will eventually cut rates, sending the index future to its biggest rally since December.
Some price action could be observed later today, with the release of UK growth numbers as well as industrial production and manufacturing while later in the day, Canada will publish its employment change and unemployment rate and the US will report on consumer sentiment, inflation expectations and its Federal Budget Balance.
EUR/USD gained ground on Thursday ending the session 0.32% higher, finding support after the US Dollar (USD) broadly fell back after rising US Initial Jobless Claims sparked renewed hope of rate cuts from the Federal Reserve (Fed).
US Initial Jobless Claims rose to 231K for the week ended May 3, the highest number of new jobless benefits seekers week-on-week since last August. With possible signs of weakness appearing in the US job market, rate-hungry markets pivoted into risk appetite. Despite broad-market hopes for Fed rate trims this year, Fed speak continues to lean into caution.
The major currency pair recovers even though speculation that the European Central Bank (ECB) will start lowering its interest rates in June remains firm.
Gold prices posted a sharp incline on Thursday ending the session 1.63% higher poised for their best week since early April, following U.S. economic data that boosted bets of an interest rate cut from the Federal Reserve.
Data on Thursday showed that the number of Americans filing new claims for unemployment benefits increased more than expected last week. Traders now expect the Fed to start its easing cycle in September.
Elsewhere, a senior Israeli official said the latest round of indirect negotiations in Cairo to halt hostilities in Gaza had ended and Israel would proceed with its operation in Rafah.
Oil prices edged up to a one-week high on Thursday on data from China and the U.S. signalling demand in the world's two biggest crude-consuming nations could climb.
In China meanwhile, crude oil imports rose on the previous year in April and exports and imports returned to growth last month, indicating an increase in demand at home and overseas as Beijing moves to shore up a shaky economy.
Moreover, Israeli tanks and warplanes bombarded areas of Rafah, Palestinian residents said, after President Joe Biden said the U.S. would withhold weapons from Israel if its forces mount a major invasion of the southern Gaza city.
All three major U.S. indexes gained on Thursday after weekly jobless claims data offered fresh hope for interest-rate cuts.
Investors largely maintained bets that the Federal Reserve will start cutting interest rates by September, although key inflation data next week is widely expected to factor into this outlook.
On the earnings front, among major aftermarket movers, cloud services firm Akamai Technologies Inc fell 10.6% after posting disappointing guidance for the current quarter and for 2024. Videogame software developer Unity Software Inc fell nearly 5% after its quarterly earnings per share missed estimates.
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