27/02/2024 - 09:05 UTCThe dollar posted a small decline against most major currencies on Monday, with the dollar index (USDX) ending the session 0.20% lower, ahead of a busy economic calendar that could provide some indication regarding the timing of the Fed’s first step towards monetary easing.
According to the CME Fedwatch tool, the possibility that the first rate cut in 2024 will take place in the May FOMC meeting is at 15% while the same possibility for a rate hike taking place in June is at 53.4%.
Wall Street’s appears to be taking a breather on Monday, with all three main stock indices ending the session with a small drop, as investors are waiting for more cues from the upcoming PCE price index data released on Thursday. In company news Domino’s Pizza stock soared over 5% after reporting quarterly results that topped expectations while Berkshire Hathaway fell 1.7% despite posting its second straight record annual profit, bringing it closer to a $1 trillion market value.
Several big market players announce their Q4 earnings reports today among which are Gaotu Techedu, Norwegian Cruise Line, AMERICAN TOWER, XP Inc., Splunk, EventBrite, Lemonade, eBay, Beyond Meat, Coupang and Virgin Galactic while other key releases in the week ahead include Best Buy, Dell, Nio, Plug Power, Paramount and Novavax.
On the energy front, the two main crude benchmarks WTI and Brent both rose by 1.58% and 1.31% respectively on Monday, supported by escalating geopolitical tensions in the Middle East, as a new flurry of strikes raises concerns over possible supply disruptions.
For today, investors focus could shift towards core durable goods orders from the US, the S&P Composite-20 Housing Price Index, US consumer confidence data and the Richmond Fed manufacturing index.
Some price action could be observed in the week ahead, upon the release of Japanese inflation numbers and Chinese purchasing managers index data keeping investors on edge, as concerns persist over slowing growth in the region’s largest economies. Another key event taking place during the week is the PCE price index data which is the Fed’s preferred inflation gauge. In addition, several Fed officials are due to speak on the outlook for monetary policy.
The EUR/USD pair managed to resume its multi-session recovery on Monday ending the session 0.29% higher. Extra losses in the US dollar (USD) prompted the USD Index (DXY) to extend further it’s so-far two-week decline.
Concerning the European Central Bank (ECB), ECB Board member Yannis Stournaras stressed the importance of maintaining prudent monetary policy. He highlighted substantial progress in inflation, suggesting that reaching the 2% inflation target by autumn is highly likely.
Tuesday kicks things off with US Durable Goods Orders, and Wednesday delivers EU Consumer Confidence and US Gross Domestic Product (GDP) figures midweek.
Gold inched lower on Monday as the market focus shifted to U.S. inflation data due this week which could influence the timeline of Federal Reserve interest rate cuts.
The U.S. personal consumption expenditure (PCE) price index, the Fed’s preferred measure of inflation, is due on Thursday, with a 0.4% rise forecast on a monthly basis. Recent remarks from Fed officials suggested the U.S. central bank was in no rush to cut rates, largely cementing bets against any cuts before June. Higher interest rates diminish the appeal of non-yielding bullion.
Oil prices gained on Monday as European diesel demand, constrained by Russian sanctions and shipping disruptions, pulled prices higher in a market jittery with U.S. refinery output limited by planned overhauls.
A slump in U.S. refining activity and disruptions to global trade have tightened diesel supplies in recent weeks, dampening historically high U.S. diesel exports to Europe this month.
Iran-aligned Houthi rebels in Yemen narrowly missed hitting a U.S.-flagged tanker on Saturday, the U.S. Central Command said. Another vessel hit by the rebels last week was abandoned and has been seen leaking fuel in the Red Sea.
U.S. main indexes ended the session on Monday lower as investors mulled ongoing quarterly earnings from corporate America and awaited further catalysts including the release of key inflation data later this week. US 30 and US 500 ended the session with losses of 0.38% and 0.17% respectively while US Tech 100 lost 0.10%.
On the earning front, Domino’s Pizza stock soared over 5% after reporting quarterly results that topped Wall Street even as inflation weighed on margins. With the fourth quarter earnings season now coming to a close, earnings reports from a string of major retailers are on tap this week. Lowe’s Companies, Macy’s, TJX Companies and Best Buy will release their quarterly readouts through the week, with any signs of a spending slowdown squarely in focus.
Beyond the PCE data, focus is also on a second reading of fourth-quarter gross domestic product data, which is due on Wednesday.
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