31/05/2024 - 08:08 UTCThe U.S. dollar posted a moderate decline on Thursday, with the dollar index (USDX) making a correction and moving 0.36% lower on the daily chart, after hitting two-week highs earlier this week. The move came following GDP data released in the U.S. that showed the economy grew slower than initially expected while investors possibly remain on the sidelines waiting for the PCE price index to be released later on today which is likely to dominate the currency markets. The Commerce Department reported the U.S. economy grew at an 1.3% annualized rate from January through March, down from a first reading in April of 1.6% growth and in line with economist estimates.
According to the CME Fedwatch tool, bets for the first rate reduction to take place in September were slightly up from 41.7% to 45.1% while November bets remained unchanged at around 46.1%.
On the energy front, the two main benchmarks WTI and Brent extended their decline on Thursday, losing another large proportion of their recent gains. WTI crude declined by 1.87% and Brent lost 1.89% of its value, amid expectations for lower global demand for fuel as well as signs of weakening business activity in top importer China. An upcoming meeting of the Organization of Petroleum Exporting Countries and allies (OPEC+) is now in focus, with the cartel likely to extend ongoing production cuts past a June-end deadline.
Negative sentiment is overflowing in Wall Street, as all three main stock indices dive deeper into negative territory, due to an overall shift of investors towards safe haven assets driven by market uncertainty and a recent rise in treasury yields. Attention this week was evolving around the major decline of Salesforce stock after it’s sales and outlook disappointed and Nvidia that slipped by more than 3.5% on Thursday.
Aside from the anticipated US inflation numbers later today, some price action could also be observed upon the release of Canada’s GDP report, the Eurozone core CPI and the U.S. personal income, personal spending and Chicago PMI numbers.
The EUR/USD pair bounced back on Thursday ending the session with moderate gains of 0.28% after the US Gross Domestic Product (GDP) growth eased in-line with market expectations, and rate-cut-hopeful investors are taking a cautious step forward ahead of Friday’s key data prints.
US GDP growth eased to 1.3% in the first quarter from the previous 1.6%, matching market forecasts and sending broad-market hopes for a Federal Reserve (Fed) rate cut.
Friday brings a fresh print of pan-European Harmonized Index of Consumer Prices (HICP) inflation. Key US data will follow-up later Friday, with US Core Personal Consumption Expenditure (PCE) Price Index inflation due during the American market session.
Gold prices rose on Thursday as the dollar and Treasury yields slipped after U.S. economic data raised hopes that the Federal Reserve is firmly on track to cut interest rates this year.
U.S. Treasury yields slid after data showed the world’s largest economy grew more slowly than previously estimated in the first quarter.
Focus now shifts to the Personal Consumption Expenditures (PCE) price index, the Fed’s preferred measure of inflation, due on Friday that could shed more light on Fed’s interest rate cuts timing.
Oil prices settled lower Thursday as heavy decline in weekly crude inventories was offset by fresh signs of weaker fuel demand following a larger-than-expected build in weekly U.S. gasoline supplies.
U.S. gasoline stockpiles rose by 2 million barrels last week, well above the 1M increase expected, following a decline in demand of 166,000 barrels per day in the week ended May. 24.
Beyond the Fed and interest rates, oil markets were also awaiting a meeting of the Organization of Petroleum Exporting Countries and allies (OPEC+), which is set to take place virtually on June 2. The cartel is widely expected to maintain its current pace of production cuts past an end-June deadline.
U.S. stock index futures fell on Thursday, extending losses as fears of high interest rates and slowing growth sparked a two-day rout on Wall Street, with focus now turning to key PCE data for more cues on inflation.
The U.S. economy grew more slowly in the first quarter than previously estimated, as gross domestic product grew at an 1.3% annualized rate from January through March, lower than the advance estimate of 1.6% and notably slower than the 3.4% pace in the final three months of 2023. Investors were now focused squarely on upcoming PCE price index data, due on Friday.
Salesforce fell nearly 20% to remain on track for its worst day since 2004 after reporting guidance that missed analyst estimates. The weaker results come amid a malaise in the software sector that isn't likely to recovery in the second half of the year. Foot Locker stock rose 15% after the retailer affirmed its guidance for 2024 as its turnaround plan showed signs of progress.
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