15/11/2024 - 08:30 UTCThe U.S. dollar strengthened against major currencies on Thursday, with the dollar index (USDX) up by 0.37% reaching a one-year peak and continuing its five-day uptrend. This surge was driven by market anticipation that the incoming administration's policies, such as imposing trade tariffs, tightening immigration regulations, and increasing the deficit, would lead to higher inflation. In addition, Fed Chair Jerome Powell said resilience in the U.S. economy meant the central bank could take its time to cut rates further. His remarks prompted traders to diminish their expectations for a rate reduction in December.
The CME FedWatch tool suggests that market participants are anticipating a more aggressive rate cut of 25 basis points in December, with a 62.4% probability, while odds for rates to remain unchanged are at 37.6%.
Britain's economy experienced a setback in September, contracting by 0.1% according to GDP data released early on Friday. This decline was primarily attributed to a stagnant services sector, coupled with contractions in manufacturing and construction. Moreover, the overall economic growth for the third quarter slowed significantly to 0.1%, a sharp decrease from the 0.5% growth observed in the second quarter. The GBP/USD appears to be on a sharp decline, down 2% on the weekly chart and headed for a seventh consecutive weekly loss.
Wall Street experienced a downturn on Thursday, with all three major stock indices closing lower on Thursday, with the decline intensifying on Friday morning. Part of this move was attributed to a speech by Fed Chair Powell, which raised doubts about a potential rate cut in December. PPI data reported on Thursday aligned with CPI data from a day earlier indicating a potential slowdown in underlying inflationary pressures. However, the current outlook for core Personal Consumption Expenditures (PCE) remains sufficiently soft to support the Federal Reserve's anticipated rate cut in December.
In the cryptos front, Bitcoin retraced from its record highs on Thursday, ending the day 3.37% lower as broader risk appetite was hit by increased uncertainty over U.S. interest rates. The overall crypto market capitalization fell from $3.12 trillion to $3.03 trillion.
The focus for Thursday lies on growth numbers from the U.K. in the form of GDP, U.S. core retail sales data and the Empire State Manufacturing Index. Some price action could also be observed upon the release of US import prices, industrial production and business inventories.
The euro continues to lose ground against the dollar, dropping as low as $1.0496 on Thursday, its lowest level since October 2023, following a hawkish speech by Fed chairman Powell and an increase in U.S. producer prices in October. PPI data came a day after CPI revealed that consumer inflation remained relatively stable last month. Additionally, the Labor Department reported a decline in the number of Americans filing new unemployment claims last week, suggesting a robust labor market.
Market participants will be attentive to U.S. retail sales and manufacturing data released today, as these figures will provide insights into the potential future monetary policy adjustments by the Federal Reserve.
Gold prices saw a significant decline this week, down by approximately 4.3%. This marks the worst weekly performance since June 2021. This move follows Trump's election victory, which boosted risk appetite and lowered demand for safe-haven assets such as gold.
The downward trend accelerated this week as the dollar surged to a one-year high, fueled by growing uncertainty about future interest rate cuts. October's persistent inflation figures and cautious remarks from Federal Reserve officials further dampened hopes for immediate rate reductions.
Bitcoin retraced from its all time high of $93.536 on Thursday experiencing a 3.37% decline. This downturn was attributed to increased uncertainty surrounding U.S. interest rates, which dampened broader risk appetite.
Dogecoin surged 65% this week, marking its best performance since October 2022. This significant increase was fueled by increased social media activity surrounding the formation of the Department of Government Efficiency (DOGE), led by Elon Musk and Vivek Ramaswamy.
On the other hand, SOL, XRP, MATIC, and ADA displayed a relatively flat-to-low range on Friday. Despite this, they all recorded substantial gains over the past week.
The US 500 fell by 0.89% on Thursday, with the decline intensifying early on Friday, following to a speech by Fed Chair Powell, which raised doubts about a potential rate cut in December.
In corporate news, Disney reported strong Q4 earnings, driven by its streaming business, leading to a 6% jump in its stock price. Cisco, on the other hand, saw a 2% decline due to a tepid full-year outlook and continued revenue decline. AMD stock remained relatively flat despite announcing layoffs of 4% of its global workforce.
Some price action could be seen later today upon the release of US retail sales numbers and the Empire State Manufacturing index.
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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