The US dollar fluctuates based on economic data and returns; the fall in oil prices affects the Canadian dollar and stocks; Upcoming data and elections influence market sentiment.
Changes in the US Dollar in Response to Market Conditions and Data Expectations
– Recent Developments: The US dollar started the week strong but quickly reversed its initial gains. It initially rose on Monday, but during European trading hours it started to fall. This move reflects investors’ complex position on the dollar amid mixed sentiment.
– Data-driven outlook: This week’s busy U.S. economic calendar is a big factor. The upcoming third quarter gross domestic product (GDP) data, the personal consumption expenditures (PCE) price index and employment figures (including the nonfarm payrolls report) are all expected to influence the dollar. The GDP report is expected to show robust annualized growth of around 3%, which would confirm the resilience of the US economy.
– Influence of Treasury yields and speculation: Strong U.S. economic data has contributed to a recent rise in Treasury yields, supporting the dollar and dampening market expectations of an aggressive Fed rate cut. However, the dollar’s appeal is mixed ahead of the US elections, with speculation about possible policy changes depending on their outcome. Traders expect a 25 basis point rate cut from the Fed, with about a 96% chance of that happening, while the possibility of a 50 basis point cut has been widely discarded.
Impact of lower oil prices on market sentiment and safe haven assets
– Current oil situation: oil prices are the center of attention after a significant drop. Israel’s recent attacks on Iranian military installations, while initially concerning, have not impacted Iran’s oil production infrastructure, easing fears of supply disruptions. This relief led oil prices to fall slightly, which created a favorable environment for stock markets.
– Broader economic influence: For currencies like the Canadian dollar (CAD), falling oil prices have limited their recovery potential, especially given weak Canadian economic indicators. As Canada is a major oil exporter, fluctuations in oil prices have a strong impact on the value of its currency. At the same time, this fall in oil prices helped contain inflationary pressures, reducing the need for rapid interventions by central banks.
– Gold and safe haven dynamics: Market risk appetite also influences safe havens like gold, which has seen minor declines. However, ongoing geopolitical tensions in the Middle East, including concerns surrounding the US elections, support demand for gold as a hedge against uncertainties. Additionally, higher US Treasury yields have dampened gold’s appeal as it does not earn interest, but general uncertainty continues to provide support.
Upcoming key economic data and election uncertainties in the United States and Europe
– Data releases expected: This week’s busy economic calendar includes crucial third-quarter GDP figures from the United States, Germany and the eurozone as a whole. The data is expected to highlight different economic trajectories, with Germany expected to post a contraction of -3%, reflecting some economic difficulties, while Eurozone GDP as a whole could post a modest annual growth of 0.3%. These figures are essential because they can influence monetary policy adjustments by the European Central Bank (ECB) and the Federal Reserve.
– Inflation and employment figures: Alongside the growth figures, inflation indicators for the Eurozone and the United States will be published. In the United States, the PCE price index, the Fed’s preferred measure of inflation, will provide insight into inflationary pressures and could influence the Fed’s decision on rates. Labor market data from the Nonfarm Payrolls report will also be a critical factor, as strong employment numbers could underscore the need for the Fed to cautiously adjust its rate easing plans.
– Attention related to the elections: the upcoming American elections further add to the complexity of the situation. Speculation around a possible Trump victory is raising concerns about possible tariffs and their impact on global supply chains, while Biden’s current term is associated with more stable policies. These election-related uncertainties contribute to dollar volatility as markets anticipate different economic and fiscal policies depending on the outcome of the election.
Main economic events of the week:
- Speech by the Governor of the Bank of Canada, Mr. Macklem (10/28/2024 – 5:30:00 p.m. and 10/29/2024 – 7:30:00 p.m.)
– Impact: High
– Devise: CAD
– Description: Governor Tiff Macklem’s remarks could reveal information about future Canadian monetary policy, particularly crucial amid inflation fears and economic uncertainty. Macklem’s guidance on interest rates, inflation and the economic outlook are closely watched by traders, impacting movements in the Canadian dollar.
- Quarterly and monthly Consumer Price Index (CPI) (10/30/2024 – 00:30:00)
– Impact: High
– Devise : AUD
– Description: Australian CPI data measures inflation, which influences the Central Bank of Australia’s interest rate decisions. A higher CPI may indicate inflationary pressures, potentially leading to rate hikes, while a lower value could prompt a dovish stance, directly affecting the AUD.
- Quarterly and annualized gross domestic product (GDP) (10/30/2024 – 09:00:00 & 12:30:00)
– Impact: High
– Devise : EUR et USD
– Description: Eurozone and US GDP figures reveal economic health and growth trajectories. Strong growth may lead to tighter monetary policies, while weaker figures could signal stimulus measures, significantly influencing the euro and dollar, respectively.
- Employment developments in the United States (10/30/2024 – 12:15:00)
– Impact: High
– Devise : USD
– Description: This report provides insight into U.S. private sector employment trends ahead of the official release of nonfarm payrolls, influencing market sentiment on economic strength, labor market health, and potential labor market adjustments. Federal Reserve policy.
- Basic personal consumption expenditures in the United States (PCE) (10/30/2024 – 12:30:00)
– Impact: Medium
– Devise : USD
– Description: A measure of inflation favored by the Fed, PCE data influences American monetary policy. Higher readings may prompt rate hikes to control inflation, while lower readings could ease policy, impacting dollar and Treasury yields.
- Euro area harmonized consumer price index (HICP) (10/30/2024 – 1:00:00 p.m.)
– Impact: High
– Currency: EUR
– Description: HICP data reflect inflation in the euro area and influence ECB policy. A high result may reinforce expectations of monetary tightening, while a low result could lead to stimulus measures, directly affecting the euro.
- US Home Price Index and S&P/Case-Shiller Index (10/29/2024 – 1:00:00 p.m.)
– Impact: Medium
– Devise : USD
– Description: Reflecting trends in the U.S. housing market, these indexes are essential for assessing economic health, with rising prices indicating robust demand and economic confidence, while declines can signal an economic slowdown.
- Unemployment rate and jobs/applicants ratio in Japan (10/28/2024 – 23:30:00)
– Impact: Medium
– Devise : JPY
– Description: Japan’s main employment indicators reflect labor demand and economic resilience. Higher employment rates generally boost the yen, while weaker figures can prompt the Bank of Japan to take stimulus measures.
- GfK survey on consumer confidence in Germany (10/29/2024 – 07:00:00)
– Impact: Medium
– Currency: EUR
– Description: As an indicator of consumer sentiment in Germany, a high level of confidence suggests strong consumer spending, while a low level of confidence could signal an economic slowdown, affecting the EUR.
- American consumer confidence and JOLTS job offers (10/29/2024 – 2:00:00 p.m.)
– Impact: Medium
– Devise : USD
– Description: Consumer confidence and job openings reflect economic optimism and the health of the U.S. job market. Increased job openings and confidence often support dollar strength, reflecting economic stability and spending potential.
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