Oct

BOC Rate Statement, Eurozone Consumer Confidence, U.S. Existing Home Sales, Crude Inventories

23/10/2024 - 07:16 UTC

The U.S. dollar extended its recent gains against most of its major peers on Tuesday, with the dollar index (USDX) adding another 0.08% to its value, still hovering near three-month highs. Expectations of a slower pace for interest rate cuts provided a significant boost to the dollar as treasury yields rose and this notion was furthered by recent data showing the U.S. economy remained resilient, underpinning expectations for U.S. inflation. The dollar was also boosted by safe-haven demand deriving from uncertainty over the upcoming 2024 presidential election and geopolitical turmoil in the Middle East.

According to CME Fedwatch tool current market expectations indicate there is a strong likelihood of a 25-basis-point interest rate reduction, with an 88.9% probability, while the odds of rates remaining unchanged are at 11.1%.

Hong Kong stocks outperformed other Asian markets, driven by strong local IPO activity and continued stimulus measures from Beijing. The Hong Kong 50 index surged 1.4%, fueled by a successful debut from China Resources Beverage, which raised $540 million in its IPO and saw its shares jump 14% on the first day.

U.S. stock market benchmarks US 30 and US 500 pulled back slightly on Tuesday's trading session, as investors grappled with rising Treasury yields and a mixed bag of corporate earnings reports. In corporate news, General Motors stock rallied 10% after reporting third-quarter earnings that exceeded analysts' expectations, driven by strong revenue growth and improved profitability. In contrast, Verizon's shares dropped 5% following its mixed earnings report. While the company beat earnings estimates, its revenue fell short of expectations.

Electric vehicle giant Tesla is set to report earnings on Wednesday, marking the biggest corporate event of the week. Other major companies scheduled to release results include AT&T, IBM, Bank of America, and Coca-Cola. To date, over 70% of S&P companies have exceeded analysts' earnings estimates.

Market participants may see some price action later today as several key economic indicators are released. These include the Bank of Canada Rate Statement, eurozone consumer confidence data, U.S. existing home sales, and the EIA weekly crude oil inventory report. Additionally, speeches by the Bank of England Governor, ECB President, and a Federal Reserve FOMC member could also influence market sentiment.

EUR/USD

The EUR/USD pair continued to decline on Tuesday, slipping another 0.18%. European Central Bank (ECB) President Christine Lagarde made several public appearances on Tuesday, but her remarks provided little momentum for the Euro. Lagarde stated that the ECB is “not unhappy with what it has seen” and cautioned that it’s too early to conclude that the inflation target has been achieved.

Her comments offered limited forward guidance, leaving markets uninspired as the Euro remains on track for a fourth consecutive week of losses against the U.S. dollar.

Looking ahead, global PMI data will be released on Thursday and this data could provide new insights into the economic health and influence market sentiment.

Gold

Gold prices extended their upward momentum for the fifth time in six sessions, hitting a record high just below the key psychological level of $2,750.

Geopolitical tensions and expectations of continued rate cuts by the Federal Reserve (Fed) have provided strong support for the precious metal.

Despite rising U.S. Treasury yields, risk aversion continues to bolster gold’s appeal as a safe haven.

In the meantime, Federal Reserve officials have shared mixed views on future policy. Meanwhile, geopolitical tensions in the Middle East continue to simmer as Israel prepares for a potential retaliatory strike against Iran following a recent missile attack.

WTI Oil

Oil prices rose for the second consecutive session on Tuesday, as traders discounted the likelihood of a Middle East ceasefire and shifted their attention to signs of stronger demand from China, which could tighten market balances in the months ahead.

China's recent economic stimulus measures have led some analysts to revise their forecasts upward for oil demand from the world’s largest crude importer.

As for geopolitical factors, hopes for a ceasefire in the Middle East remain slim. U.S. Secretary of State Antony Blinken’s efforts to broker peace have seen little progress, and with Israel continuing its military campaigns in Gaza and Lebanon, traders remain skeptical that a ceasefire is imminent.

US 500

US Tech 100 ended the session with minor gains while US 500 and US 30 edged lower on Tuesday following a subdued session on Wall Street, as rising Treasury yields and uncertainty surrounding the upcoming presidential election dampened risk appetite.

Investors sifted through a mix of corporate earnings reports, with attention now shifting to Tesla's third-quarter earnings, set to be released after the market close on Wednesday.

Tesla Inc, the world’s most valuable automaker, is set to report its third-quarter earnings on Wednesday. Tesla's earnings come after the company’s third-quarter deliveries fell short of expectations, and the much-anticipated reveal of its robotaxi left investors underwhelmed.

In addition to Tesla, major companies like AT&T Inc, IBM, Coca-Cola Co., and Bank of America Corp. are also expected to release earnings on Wednesday.

BOC Rate Statement, Eurozone Consumer Confidence, U.S. Existing Home Sales, Crude Inventories

EUR/USD

Gold

WTI Oil

US 500

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