21/11/2024 - 08:49 UTCThe U.S. dollar recovered against most major currencies on Wednesday, with the dollar index (USDX) up by 0.45% and closing in on its recently reached one year high. The US dollar strengthened after the US embassy in Kyiv closed due to a potential major air attack. This came a day after Ukraine used US-supplied missiles against Russia, prompting Putin to lower the threshold for nuclear use. These events risk escalating Western involvement in the conflict, increasing demand for the safe-haven dollar.
According to the CME fedwatch tool, bets for rates to remain unchanged in the December FOMC meeting currently stand at 44.5% while odds for a 25 bps rate cut are at 55.5%.
Gold prices saw some support from recent geopolitical tensions following a two-week sharp decline, as lower expectations for interest rate cuts and a stronger dollar weighed on the precious metal. Sticky inflation data and less dovish Fed commentary fueled uncertainty about future rate cuts, increasing demand for interest bearing investments.
Wall Street sentiment appears positive, NVIDIA surpassed Q3 earnings estimates but provided a more conservative Q4 revenue outlook. This cautious forecast led to an initial decline in the stock price. Nevertheless, analysts maintain a positive outlook on the company, which recently solidified itself as the world's most valuable listed firm.
On the cryptos front, Bitcoin broke its all-time high once again early on Thursday, reaching levels right below the $98K mark. According to reports, Bitcoin’s recent rally was fueled mainly by optimism over a second Trump presidency, and more crypto-friendly regulation. World’s second biggest crypto Ethereum, was almost unchanged while meme token Dogecoin, which had shot up in popularity after being potentially referenced by Trump, declined although it remained close to recent three-year peaks. The overall crypto market capitalization shot up to $3.32 trillion on Thursday compared to $3.12 trillion a week ago.
For Thursday, markets will most likely be focusing on weekly jobless claims numbers from the US as well as existing home sales and the Philly Fed Manufacturing Index. In addition, some price action could be seen upon speeches from several key FOMC members.
The EUR/USD pair retreated on Wednesday ending the session 0.58% lower. The Euro weakened as the US Dollar (USD) rebounded sharply, driven by expectations of fewer interest rate cuts from the Federal Reserve (Fed) in its policy-easing cycle.
The Fed’s data-driven stance suggests a more cautious approach to rate cuts, with analysts predicting a rebound in US inflation and stronger economic growth.
President-elect Donald Trump’s control of both houses is expected to facilitate the implementation of his economic policies, including plans to raise import tariffs by 10% and reduce taxes. These measures are seen as limiting the scope for deeper Fed rate cuts.
Gold prices continued their upward trajectory for the third consecutive session, defying the strength of the US Dollar (USD) as heightened risk aversion drove demand for safe-haven assets.
On Tuesday, Russian President Vladimir Putin authorized the potential use of nuclear weapons in retaliation to Western actions. Reports also indicated that the White House has sanctioned Ukraine’s use of US-supplied weapons inside Russian territory. These developments have further bolstered gold’s appeal as a safe-haven asset amid geopolitical uncertainty.
Oil prices declined on Wednesday, weighed down by a larger-than-expected increase in U.S. crude and gasoline inventories. However, losses were limited as concerns over the escalating conflict between Russia and Ukraine heightened supply risks.
According to the U.S. Energy Information Administration (EIA), U.S. crude and gasoline stocks rose significantly last week, exceeding expectations and pressuring oil prices lower. In addition, Norway's Equinor announced the restoration of full production capacity at its Johan Sverdrup oilfield in the North Sea following a power outage, further boosting global supply.
Despite bearish inventory data, geopolitical tensions kept oil prices supported. The ongoing war in Ukraine, particularly heightened conflict with Russia, raised fears of future supply disruptions.
The US Tech 100 closed slightly lower on Wednesday, pausing after the prior session’s rally as escalating tensions between Russia and Ukraine, along with weak earnings from Target, weighed on investor sentiment. The US 30 edged higher, while the US 500 ended slightly lower.
Shares of Nvidia dipped 0.76% during regular trading and declined further in after-hours trading. While the company’s fourth-quarter revenue forecast slightly exceeded estimates, it fell short of the lofty expectations of some investors.
Investors remain cautious amid geopolitical uncertainties and mixed earnings results, with attention now turning to upcoming macroeconomic data and Federal Reserve signals ahead of its December meeting.
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