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29
May

Possible Debt Ceiling deal in the horizon, Markets on hold on Monday

calendar 29/05/2023 - 07:52 UTC

The U.S. dollar fluctuated between gains and losses on Friday, only to end the day almost unchanged, with the USDX posting a 0.04% loss to end higher for a third week in a row. Against the Turkish lira, the greenback reached as high as 20.41 on Friday, right below its all-time high of 20.60, following a win by President Recep Tayyip Erdogan in Turkey’s presidential election, defeating opposition leader Kemal Kilicdaroglu and resuming his rule for a third decade.

Progress is expected in the long-awaited deal to raise the U.S. debt ceiling, as President Joe Biden said on Saturday that him and McCarthy reached a budget agreement in principle, potentially settling some uncertainty in the equity and commodity markets where some risk-taking could be seen.

Precious metals are seen trading sideways in the past two days, following a plunge early last week. Energy prices are steadily gaining ground, as the summer driving season kicks in, while investor focus is now turning to key Chinese data this week for hints on where manufacturing and services activity stands in China.

With a possible U.S. debt deal on the horizon, the main stock market indices in the U.S. opened with a gap to the upside on Monday, following a positive move on Friday where the US 500 rose by 1.45% the U.S. 30 rose by 1.13% and the US tech 100 was up by a sharp 2.64%. In Asia, the Japan 225 gained by more that 2% for a seventh week in a row, hitting a new all-time high whereas China is moving in a negative tone with the Hong Kong 50 down by 4.51%, and the China A50 declining by 2.79% on Friday.

A quiet session is expected on Monday with Bank holidays in Switzerland, the U.K., France, Germany, and the U.S. In the week ahead, U.S. consumer confidence, CPI reports, job openings and non-farm payrolls data could influence the Fed's decision on monetary policy in the upcoming June meeting.

EUR/USD

After three consecutive sessions with losses, the EUR/USD pair posted minor gains on Friday ending the day 0.06% higher.

On Friday, U.S. consumer spending increased more than expected in April, jumping 0.8% last month, the Commerce Department said on Friday, boosting the economy's growth prospects for the second quarter. The personal consumption expenditures (PCE) price index increased 0.4% in April after rising 0.1% in March.

Leading European policymakers struck varying tones on the future path of euro zone inflation on Friday, with European Central Bank chief economist Philip Lane pushing back against concerns about core inflation.

EUR/USD

Gold

Gold prices continued the downtrend and posted a third straight weekly loss, declining by 1.45%.

Gold was pressured Friday after the Federal Reserve’s index for U.S. inflation came in better than expected for April, indicating that the central bank could raise interest rates again.

U.S. President Joe Biden said on Sunday he had finalized a budget agreement with House Speaker Kevin McCarthy to suspend the $31.4 trillion debt ceiling until Jan. 1, 2025 and that the deal was ready to move to Congress for a vote.

The news helped ease some fears of a possible economic disruption stemming from a U.S. default, spurring gains in risk-driven assets. This in turn, possibly weighed on gold, which usually works as a safe haven in times of economic duress.

Gold

WTI Oil

Oil prices ended 1.29% higher on Friday as U.S officials appeared close to a debt-ceiling deal. A possible deal helps ease some concerns over an imminent U.S. default, after weeks of intense negotiations kept oil markets on edge. The market was also weighing conflicting messages on supply from Russia and Saudi Arabia ahead of the next OPEC+ policy meeting.

Focus this week is now on key manufacturing and services activity readings from China, which are expected to shed more light on a rebound in the world’s largest oil importer. Signs of a slowdown in Chinese crude demand had rattled oil markets through May, putting them on course for a fifth straight month of losses.

WTI Oil

US 500

U.S main indexes rose on Friday as talks on raising the U.S. debt ceiling progressed and gains in the Technology, Consumer Services and Industrial sectors led shares. Higher.

At the close, the US 30 and US 500 posted 1.13% and 1.45% gains respectively, while US Tech 100 climbed 2.64% at the end of the session.

For the week, the US 500 rose 0.20%, the US 30 fell 1.10% and the US Tech 100 jumped 3.44%.

Investors will be watching the debt ceiling talks closely, as the U.S stock market is closed today for the Memorial Day holiday.

US 500

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