February 29, 2024
CURRENCIES:
· The U.S. dollar saw a modest increase, with its strength limited by low U.S. Treasury yields, indicating market caution.
· Traders are eagerly awaiting the core PCE deflator data, a key inflation metric preferred by the Federal Reserve, which could significantly impact the central bank’s policy direction and market volatility.
· Predictions for January’s core CPI suggest a 0.4% month-over-month increase and a slight annual deceleration from 2.9% to 2.8%, indicating a minimal shift towards lower inflation.
· Recent CPI and PPI reports for the same period have been significantly higher than expected, suggesting that investors might be underestimating inflation risks, which could lead to surprises in the upcoming data.
· A higher-than-expected PCE report may lead to Wall Street adjusting its expectations for Federal Reserve rate cuts in 2024 and could delay the anticipated easing cycle, potentially increasing U.S. Treasury yields and the U.S. dollar value while negatively affecting gold prices.
· Analysis of FOMC meeting probabilities as of February 28 reflects market anticipation and interest rate expectations.
· The article will also cover technical analyses for currency pairs EUR/USD, USD/JPY, GBP/USD, and gold, focusing on recent price trends and identifying key levels for potential buying or selling pressure, useful for risk management in trading strategies.
STOCK MARKET:
· US stock futures dropped slightly as investors awaited the Federal Reserve’s important inflation metric to discern future interest rate directions. Bitcoin continued its ascent, surpassing $63,000.
· S&P 500 and Nasdaq 100 futures both saw a decrease of around 0.3%, while European stocks experienced slight gains amidst a busy earnings announcement day. Notable movements included Moncler SpA’s rise after exceeding profit expectations, Air France-KLM’s drop due to a fourth-quarter loss, and Anheuser-Busch InBev’s decline after failing to meet profit forecasts.
· The market is preparing for the release of the US core personal consumption expenditure (PCE) data, expected to highlight the Federal Reserve’s challenge in reaching its 2% inflation target. This data could indicate the Fed’s continued cautious approach towards easing monetary policy.
· Asian stock markets improved, led by a rebound in Chinese shares. The yen experienced a notable increase against the dollar following indications from the Bank of Japan that it might end its negative interest rate policy.
· Bitcoin’s value neared $64,000, continuing its growth spurred by new demand from exchange-traded funds, approaching its record high of just below $69,000 set in 2021.
· Treasury yields rose slightly after a bond rally, with the 10-year yield decreasing by four basis points and the two-year yield by six points, as per the previous day’s trading.
· Comments from New York Fed President John Williams and Atlanta Fed chief Raphael Bostic emphasized the ongoing battle against inflation and urged patience with policy adjustments, respectively.
· Market predictions align with Federal Reserve officials’ December projections, anticipating roughly 80 basis points of easing by year’s end, equivalent to three rate cuts.
· The dollar weakened against other currencies, particularly the yen, as traders expect a narrowing interest rate gap between Japan and the US.
· Upcoming key events include economic data releases from Germany and the US, statements from Federal Reserve officials, and PMI reports from China and the Eurozone.
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