Last night’s turnaround on Wall Street saw all the major US indices bounce off the lows made at the beginning of yesterday’s session. This has been the catalyst for a sharp rally in European indices in early trade this morning. Investors got further encouragement to snap up marked down equities as crude oil steadied overnight. Despite this, the front month WTI contract continues to spend most of its time below $48. Investors seem wary of coming back in on the long side ahead of tonight’s US inventory update from the American Petroleum Institute.
The US dollar has also continued to recover this morning. Yesterday the Dollar Index hit its lowest level since early November - just days after the greenback began a rally in the aftermath of Donald Trump’s surprise election win. And once again, it’s all about politics. Monday’s initial sell-off in risk followed on from the Trump administration’s failure to get sufficient Republican support to repeal and replace Obamacare. The worry now is that those same Republicans will oppose Trump’s planned tax cuts, particularly as there will be no savings from repealing Obamacare. Nevertheless, investors are once again putting their trust in the new president and for now seem happier to buy the dips than sell the rips.
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EUR/USD stays below 1.1100, looks to post weekly losses
EUR/USD continues to trade in a narrow range below 1.1100 and remains on track to end the week in negative territory. Earlier in the day, monthly PCE inflation data from the US came in line with the market expectation, failing to trigger a reaction.
GBP/USD struggles to find a foothold, trades near 1.3150
GBP/USD stays on the back foot and trades in negative territory at around 1.3150 on Friday. The US Dollar holds its ground following the July PCE inflation data and doesn't allow the pair to stage a rebound heading into the weekend.
Gold retreats toward $2,500 ahead of the weekend
Gold stays under modest bearish pressure and declines toward $2,500 in the American session on Friday. The 10-year US Treasury bond yield edges higher toward 3.9% after US PCE inflation data, causing XAU/USD to stretch lower.
Week ahead – Investors brace for NFP amid Fed rate cut speculation
Here comes another NFP week, with investors eagerly awaiting the results as they try to discern the size and pace of the Fed’s forthcoming rate cuts. The weaker than expected July numbers triggered market turbulence, instilling fears about a potential recession in the US.
Easing Eurozone inflation to back an ECB rate cut in September Premium
Eurostat will publish the preliminary estimate of the August Eurozone Harmonized Index of Consumer Prices on Friday, and the anticipated outcome will back up the case for another European Central Bank interest rate cut when policymakers meet in September.
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